Premiership club owners are likely to vote for a proposal to give a minority stake to the private equity firm CVC in return for more than £200m, two months after they turned down a takeover bid.
CVC, which held a majority stake in Formula One between 2006 and 2017, came back with a new offer that would mean it ran the commercial arm of the Premiership but not the league itself. This would keep the agreement within World Rugby’s regulation governing ownership and mean the 12 clubs enjoyed a greater proportion of profits than under the original bid.
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Premiership Rugby has held talks with CVC in recent weeks and it is understood a firm offer will be tabled at the next board meeting, which is to be attended by the clubs’ owners, on 11 December. The 12 would each receive an immediate cash injection of around £20m at a time when only Exeter are in profit.
The debts of most clubs have grown in recent years, largely because of wage inflation which has accounted for most of the growth in turnover. CVC’s money will not go into the pockets of players because the salary cap is pegged for the next two seasons but will be used to improve infrastructure and pay off debt.
Bath are hoping to redevelop the Recreation Ground, Harlequins are planning a new stand and Leicester hope to start a £22m project next summer to build a hotel and a car park alongside their Welford Road stadium. Contracts have been exchanged with a developer and the project hinges on planning permission.
While some owners have reservations about bringing in an external partner which would take out a significant chunk of the Premiership’s profit each year, others argue investment is needed if clubs are to achieve their goal of sustainability.
This season Northampton posted another loss and earlier this month Wasps announced their pre-tax loss had more than doubled to £9.7m, with the club’s debt rising to £56m. The bottom line is that if every owner demanded the money owed to them be immediately repaid there would be no Premiership; the Rugby Football Union is in no position to help after losing £30m last year.
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A question the owners have to weigh up is whether the cash injection would leave them worse off in the long term. They have to balance the money they would receive from CVC against the reduction from central funds each year –the money which is generated from television and sponsorship deals for the league. How long would it take to make up the £20m?
CVC believes the tournament has undervalued itself and that the TV market in particular has been underexplored. The Premiership’s current deal with BT runs until the end of the 2020-21 season while it is in its first year with the title sponsor, Gallagher.
The expectation is that CVC will tap into social media and try to engage the likes of Amazon and a greater share of young viewers, but it did not do that with F1 which next year starts a £600m, six-year deal with Sky. Critics of that agreement accused CVC of taking far more out of the sport than it put in.
The clubs would continue to run the rugby side as well as policies like the rugby cap. CVC would not be able to influence the agreement Premiership Rugby has with the RFU over the management of elite players and it would not be given a position on the professional game board.
One club official admitted giving CVC a stake would be a gamble, one that would not be taken without close scrutiny of what it would mean for clubs in the medium and long term. He said: “It is clearly attractive in the short term because it would provide money immediately for projects or to reduce debt, but the devil will be in the detail.”