NZ Rugby chair David Kirk has revealed the organisation is “considering” buying out private equity firm Silver Lake, who invested $262 million to secure a stake in the national game’s commercial revenues.
Kirk made the comments in an interview with Q+A’s Simon Mercep, conducted at the NZ Rugby AGM at Hnry Stadium in Wellington.
Currently, the investment is in the form of a loan, but Silver Lake have the option to convert that to an equity share of New Zealand Rugby Commercial, which operates the business side of the game.
Kirk said that if a buyout were to happen, it would likely take the form of a new loan, to raise the money to cover Silver Lake’s loan.
“So in the first instance, it’s a question of cost of capital – what’s it costing us to have a loan from Silver Lake, versus what would it cost us to have a loan from somewhere else, and we need to balance those two things,” said Kirk.
“But we also need to look into the future and say when it does convert, what will the effective cost of capital be, and us having to pay out every year a certain amount to someone else.”
Kirk confirmed a buyout was “definitely under consideration”.
“There’ll be an appropriate time [to make that decision] and Silver Lake are very open and straightforward in terms of dealing with us.”
Kirk noted that a major consideration is that payouts to Silver Lake are linked to the growth of net revenue, meaning if revenue minus the cost of generating that revenue grows, so too would the amount of money going to Silver Lake.
Overall, Kirk said Silver Lake had added value to NZ Rugby since the partnership began, though admitted when the deal was first proposed, he was against it in his then-capacity as chair of the NZ Rugby Players Association.
“Well the important word in your last sentence is ‘first mooted’ – when it first came up it wasn’t in a form that was acceptable to the players,” said Kirk.
He said over time, the players were able to make changes, including increasing the value to the players from the partnership, and to institute a review of governance.
International rugby played offshore is key to the growth strategy over the coming years, particularly with another upcoming All Blacks test in the USA, and the launch of the new Nations League competition.
Kirk was in full agreement to the contention that international fans are now more financially important to NZ Rugby than New Zealand-based fans.
“Definitively for delivering revenue for us, because there’s only five million of us. In terms of generating money for a global sports team, it’s got to be generated from outside New Zealand.”
The strategy of making the All Blacks a global brand has drawn some questions about whether the grassroots of the game, and traditional fans, are being neglected.
On the broader health of rugby, Kirk said “the direction of travel is positive” for the game.
Player numbers have improved over the last year, though Kirk conceded rugby has lost its place of primacy that it had when he was playing for the All Blacks in the 1980s.
“No it doesn’t, and I don’t think any major sport does. I just think there are so many other things that – on one hand you could say distract, and on the other hand you could say engage people.”
But he argued that rugby continued to be a force for social cohesion, and a positive societal force in New Zealand.
Q+A with Jack Tame is made with the support of NZ on Air