Boks for sale: Want a piece of the action?

THE trophy-rich Springboks are up for grabs, but a private equity deal over the commercial rights was nixed last week by South Africa’s various rugby unions, who voted down the sale of a 20% stake for $75m to the US’s Ackerley Sports Group. 

Now, a consortium including alternative investment outfit AltVest, trading platform EasyEquities, asset manager 27four and fintech platform RainFin have announced their interest in doing a deal that would bring in a legion of fans as investors. Currency's (currencynews.co.za) Guilettia Talevi spoke to AltVest chief investment officer Akshay Karan. 

What exactly are you proposing? 

It’s an expression of interest, so there’s an important piece of context around this whole thing, and that is that there’s a bidder currently who has been in a multi-year process to get to where it is now and as a result of that it has exclusivity. And there’s a practical limitation of the information to the public – so there’s only so far you can go without that info. And until that exclusivity ends you can’t really kick the tyres very deeply on what this deal would look like. 

Now, that being said, there are a few important points: our view, based on what’s available in the market, is that we can at least get to the valuation they’ve been talking about. So when you think about what a local alternative could look like, this is not trading off local for less. We firmly believe that we can pull together a local offer that puts as much value in SA Rugby’s pockets as it would be getting now, and possibly more, if it’s structured well enough.  

What would ‘structured well enough' look like? 

I don’t want to be overly critical of the deal that is in the market, but from our perspective, most importantly, there can be a mechanism for meaningful fan participation and community ownership. And that, for an asset like this, I think is a fundamental requirement. 

The truth is that for sporting franchises globally, a shareholder-centred ownership model does not work. It’s happened time and again. When you’ve had foreign owners coming into a sporting franchise, it creates antagonistic pressure between the sporting franchise and the owners. We believe you can have a stakeholder-centred model where stakeholders own some of the economic rights and have a seat at the table. 

The second point is, there’ve been pieces of information that have come out around the Ackerley transaction that create the impression that this is quite a complex structure: profit participation, debt elements, fees etc. There’s merit in having both debt and equity in a transaction like this, but you can have them in a much simpler, easier-to-understand and investable way. You can have debt as wholesale funding, and then get debt investors who take debt risk and get debt returns.

You can have the equity, and then it’s much clearer to understand for outsiders looking in who’s put the capital in, what risk they’ve taken, and what returns. And part of the frustration from the public is that because you have this hybrid structure, no one really understands what risk is truly being taken and what return is being given.  

Had you been working on a proposal before the news came out that Ackerley was in talks with the South African Rugby Union? Or was your pitch prompted by the news? 

We’ve been working on having a sporting investment opportunity within AltVest for about four years, so this is a key pillar of something we’ve been wanting. Now, this deal we’ve probably been working on with our partners for most of this year. This is a truly exciting, unique South African asset that ordinary people and institutions would love to invest in, so ideologically there was this natural fit. We spoke to our ecosystem partners and, as it started to seem like it was conceivable that other options were being considered, the interest picked up. We have a firm idea of what a deal could look like. 

Have you discussed your approach with outside players like the Public Investment Corporation, say?  

Yes, we have. Now there’s obviously only so much commitment you can get for something that is at this stage, but the interest exists. Within [our] consortium, 27four is an institutional funder and it is comfortable saying there will be institutional appetite. What we envision happening – if we are successful – is that this consortium won’t be the final answer; we want this to be as inclusive as possible. We want to work with other funding partners and potentially with other bidders to get the right answer for South Africa and SA Rugby.  

So would EasyEquities be the platform that you’d use to bring in retail investors? 

We wanted to demonstrate that there was a strong enough ecosystem to execute every part of this puzzle, meaningfully. So you’d have a representative of institutional capital markets, of retail capital markets, you have representatives of distribution, so when you talk about broad economic participation there’s an example of the parties that can deliver that. And if we think about democratisation more broadly, or a blockchain-enabled investment, there’s a member of the consortium that’s applying their minds to that as well. This [team] is the skeleton, and over time we’d expect more parties on the institutional side. 

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Is this a strategic salvo in declaring yourselves interested at this point? Why go public now? 

First, I think we have everything we need to do this; there’s a core capability that exists, we can deliver this transaction. The second key consideration is that we have communicated to SA Rugby that we are interested, but we also wanted to make it clear to a broader stakeholder community that an alternative exists. So that when we go to retail investors – hopefully – and say: guys, part with your hard-earned money, they will do so, months in advance, knowing there was an option. If they’re interested in it, they should express their views on it. 

We’ve seen a lot of media uptake – particularly in traditional rugby circles who have picked up the story – and I think the idea around fan participation resonated with them, the idea of owning a piece of this sporting team that you love. And that’s what we wanted to achieve: we wanted the rugby community to get excited about the opportunity to own a piece of the Springboks.  

When does the exclusivity period end? 

At the end of December. It is our understanding that it’s within the rights of the bidders to submit another bid during the exclusivity period. But once the exclusivity lapses it will be firmly in SA Rugby’s court to decide how to approach this. Our appeal is, ‘Guys, give us a chance. Or at least consider it.' That’s the crux: fan ownership should be part of this discussion; it shouldn’t be a purely private market transaction because this is not a private asset – this is a public asset. South Africans have proven they will part with their money for the Springboks. 

And you’d do so even more willingly if you have an economic interest, I guess? 

Exactly. It’s how you connect with your fans – when you make them meaningfully invested in what success looks like. We took a look at the value drivers for sport franchises globally and there are two that jump to mind: attendance, and then global audience, in other words, how many people do you get into the stadium and how many people watch the team on TV. It’s true of Man United or the Indian cricket team. And South Africa has the highest attendance of rugby in the world – even across our franchises.

Our national team is the darling of the global calendar – every nation wants a Springbok Test, so we have these incredible foundational tools to become a commercial superpower. That value should be shared with the ordinary South Africans who make it possible; the hundreds of thousands of them who go to the stadium to watch the team play.  

♦ VWB ♦

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