SA RUGBY’S $375 MILLION VALUATION: A GAME-CHANGING EQUITY DEAL
- Farha Jhetam
For decades, rugby has ignited a sense of unity and national pride with fans from all walks of life. The Springboks’ successes on the world stage have filled stadiums with waves of green and gold, symbolic of the power of sport to unite a country. Building on this legacy, SA Rugby has embarked on a new chapter that brings in an equity partner with the aim of enhancing its financial stability and commercial future.
These discussions first began in 2018, however the impact of covid resulted in this process being halted. Last December, SA Rugby approved American investment firm, Ackerly Sports Group (ASG), as the preferred bidder. ASG’s proposal sees the firm purchasing a 20% stake in SA Rugby’s commercial arm for $75 million (R1.3 billion) equating to a total valuation of $375 million (R6,6 billion). In December 2024, SA Rugby member unions will vote on the deal, with a 75% majority required for the deal to proceed.
The deal has been met with much criticism since its announcement with several concerns being raised. One major issue is the potential loss of control over decision making to a foreign investor. Questions have also been raised about how the funds will be used, whether the investment could focus more on commercial ventures focused on profit rather than grassroots programs that promote community development. As with any capital injection, the key lies in how the funds are utilized.
Should the capital be invested strategically and constructively to grow the game, improve facilities and keep professional rugby at a high level, the deal could be highly beneficial.
However, if the funds are mismanaged or not allocated effectively, this could lead to further issues. Another key concern is around the valuation of the deal. For perspective, in 2022, New Zealand Rugby’s equity deal with the US-based firm, Silver Lakes, valued its commercial operations at approximately $1.5 billion (R27.2 billion).
This begs the question, what factors have caused this stark difference in valuation, that sees New Zealand Rugby valued at four times more than SA Rugby? Considering the fact that South Africa is one of the top rugby nations with a highly competitive team, is SA Rugby under-valued?
Market valuations are based on revenue, profits and future growth rates. In addition, commercial opportunities, global reach, and market conditions in each country are key factors that influence the valuation.
From a brand perspective, the All Blacks are one of the most globally recognized in sport. Their winning track record and distinctive “Hakka” have attracted significant international brand deals and sponsorships. In addition, due to its wide international audience and reach, broadcasting rights for New Zealand Rugby are seen as more valuable. Despite SA Rugby’s large following, NZR’s ability to consistently command high prices has positioned them as a more attractive investment.
Market conditions in South Africa in recent years which have seen slow economic growth and a weakening Rand, limits the domestic potential. This often impacts on SA Rugby’s ability to attract high value sponsorships, which directly impacts on its valuation.
We have also seen many of South Africa’s top talent pursuing lucrative offers from international clubs, which affects local leagues and therefore local rugby’s market value. In contrast, NZ has managed to retain much of its top talent therefore enhancing the value and appeal of its domestic leagues.
Despite the valuation gap, SA Rugby’s equity deal presents a significant opportunity to unlock new revenue streams and expand its reach to international spaces. This deal ensures that the legacy of the Springboks can continue to thrive on a global stage.