Saudis may invest in rugby clubs

[Neils]

https://www.telegraph.co.uk/rugby-union/2024/01/31/saudi-arabia-buy-leicester-gloucester-northampton-newcastle/

Sorry not in a position to cut and paste.

[backdoc]

"Saudi Arabian investors are in discussions to invest millions into four of England?s top-flight rugby clubs.

Telegraph Sport can reveal that associates of the Saudi sovereign Public Investment Fund (PIF), which took an 80 per cent stake of the Premier League?s Newcastle United in 2021, have held discussions with Gloucester, Leicester Tigers, Northampton Saints and Newcastle Falcons about proposed seven-figure investments.

It is understood that the group are seeking control of stadium naming rights and the establishment of a rugby academy in Saudi Arabia as part of any potential stake in the four clubs, an investment which could be worth as much as a combined ?60 million to the clubs involved.

Senior Premiership executives are thought to be aware of the discussions but the organisation told Telegraph Sport that the league could not comment on individual club matters.

Even without the spectre of last season ? when three Premiership clubs went out of business in the space of 10 months ? such an investment would come as a major boost to the English rugby landscape. But, in the context of last year, such large financial backing, albeit with ethical considerations, would represent one of the most remarkable moments since the Premiership introduced professionalism in 1995. It would involve four established clubs sacrificing a further chunk of their revenues following the CVC Capital Partners Investment in 2019.

?Investors see room for growth in the clubs?
Telegraph Sport understands that Gloucester were initially the sole representatives in negotiations but that the investment group did not view the West Country club alone as an attractive enough proposition. Newcastle, alongside Leicester and Northampton ? two of the league?s best supported clubs ? were subsequently brought to the negotiating table to add greater value.

Discussions continue to progress, even if the pace has slowed in recent weeks. It is understood that one of the four clubs has established a direct dialogue with the Saudi group and is exploring the possibility of individual investment should a joint venture fall through.

Rugby Football Union?s regulations regarding club ownership state that any change of 10 per cent or less does not require consent from the governing body. Alongside Premiership Rugby Limited, the organisation could block a group from owning more than 10 per cent of more than one club in the league, too, while under European Professional Club Rugby regulations, no two clubs can be owned by a solitary body with more than a 20 per cent stake.

A source with knowledge of the talks said: ?Conversations between potential future investors in the sport regularly take place. Investors see the headroom for growth in the clubs.? A Gloucester source added that the club did not comment on commercial or investment matters while Newcastle, Northampton and Leicester declined to comment.

In 2021, PIF acquired an 80 per cent stake in Newcastle United in a deal worth around ?300 million with former owner Mike Ashley. Two other members of the consortium, the Reuben Brothers and Amanda Staveley, both took a 10 per cent share. The takeover process lasted for 18 months and faced interventions from the governments of both the United Kingdom and Saudi Arabia.

Amnesty International were among the bodies to oppose the attempt, saying that it was part of Saudi Arabia?s efforts to sportswash their human-rights record. Two years after the takeover of Newcastle United, the Premier League changed its ownership rules to disqualify potential owners and directors who had committed human-rights abuses.

Q&A: Rugby?s potential Saudi future
What does this mean for the Premiership?
The fact such a group are interested in investing large sums of cash into the league the season after three clubs went bust should be seen, financially, as a positive ? especially with the salary cap set to rise from ?5 million to ?6.4 million and clubs desperate for an injection of funds.

Even if this venture was worth ?15 million to each club, that could be transformative to a team like Newcastle Falcons which slashed its budget this season in an attempt to become more financially sustainable.

There are, however, significant ethical concerns over the arrival of the Saudis, particularly because of the country?s human rights record.

Why are Saudi Arabia interested?
This would be a first foray into the world of rugby union, following other big-hitters like CVC and Silverlake in the private equity world. An investment in rugby would be a drop in the ocean compared to the ?300 million that PIF ploughed into Newcastle United and more than a billion spent on LIV Golf.

There is, of course, the sportswashing element, with Saudi Arabia looking to distract from its human rights record. If a deal were successful, the Premiership may even follow boxing, tennis and golf in staging some matches in the kingdom.

What?s at stake?
If the investment was across all four clubs, the group could not claim a stake of more than 10 per cent in each. If just one club received Saudi investment, only changes of ownership of 11 per cent or more would require consent from the governing body. If a club valued itself at ?50 million, therefore, it could expect to receive ?5 million for a 10 per cent stake. There is a chance, too, that Saudi state-backed businesses could come in with further capital as part of sponsorship agreements.

Can the Saudis invest in more than one club?
Yes, but they are prohibited from acquiring more than a 10 per cent stake in each according to RFU and Premiership regulations. At European level, that is 20 per cent, which is why the proposed takeover of Gloucester by Mohed Altrad, the Montpellier owner, was blocked.

Can the RFU do anything about it?
Only if the potential deals are above a 10 per cent ownership of any club. If they are less, the governing body would be powerless ? in terms of regulations ? to stop any deal. Even if the investment were more than 10 per cent of just one club, the RFU could step in but it is not clear at this stage whether they would permit or block the deal."

[Heathen]

This could blow the Premiership out of the water and completely fuck the RFU. Could be interesting for the Wasps phoenix.

[baldpaul101]

This could blow the Premiership out of the water and completely fuck the RFU. Could be interesting for the Wasps phoenix.

Not sure how any of those things would happen.
The story as written is about Saudi's investing in individual clubs, like they have done with Newcastle United, not setting up a separate competition structure, like in golf.
As for Wasps, why would anyone invest in a club that's gone bust? Why not buy a chunk of an already moderately successful club like those listed?

[Neils]

Why Premiership clubs are in a desperate dash for Saudi cash

Paying back Covid bail-outs amounting to ?150m are compounding errors made when boosting wages, compelling clubs to seek urgent investment
Gavin Mairs
Chief Rugby Union Correspondent
1 February 2024 ? 7:00am
Gavin Mairs



Ever since the global pandemic inflicted financial devastation on Premiership Rugby, it has been only a matter of time before the door would be open to new investors. The surprise is not that it has happened but that it took so long.

Government loans bought time for most, but not enough to save Worcester, Wasps and London Irish, who themselves were courting investment from a US consortium at the end of last season that sadly had no hope of delivering what had been promised.

Other clubs have had to look within to liquidate more cash. In February last year, Leicester Tigers, arguably the most robust brand in the English game and certainly the one with the biggest fanbase, had to receive an injection of ?10 million from  Tom Scott ? who currently owns a controlling stake in the Tigers ? and Peter Tom, the club?s long-standing chairman.

Another success story of English club rugby, Exeter Chiefs, also required a cash injection via the sale of a percentage of shares in the Sandy Park Hotel Limited to club chairman Tony Rowe in order to provide ?an injection of capital to keep cash flow going? and to ?help service substantial debts accrued by Exeter Rugby Club due to the impact of the Covid pandemic.?

Gloucester, one of the four clubs who are in discussions with associates of the Saudi sovereign Public Investment Fund (PIF) over a 10 per cent stake, had warned in September 2020 that the club would go out of business within six months without a government bail-out.

The problem is that those ?150 million bail-outs still have to be repaid. The Department for Culture, Media and Sport rightly wants to ensure that the taxpayer gets value for money and that rugby union is not seen as receiving preferential treatment. The clubs meanwhile would like to kick the repayment can down the road, at least for a bit, but without soaring interest rates adding to the debt.

Yet the pandemic alone was not the sole cause. Losing crowds and reduced TV money exaggerated fault lines that were already in place. Spending decisions taken as long ago as 2014 off the back of a bonanza deal with BT Sport for the TV rights were compounded two years later when the Rugby Football Union punted on an ever-increasing revenue stream by offering the clubs a ?220 million deal for the professional game agreement, including the release of players for the England team.

Those who got their sums wrong have long since left the game and left others to pick up the pieces, but the inflation in player salaries quickly proved unsustainable.

The ?220 million deal in 2018 with CVC, who bought 27 per cent of the Premiership clubs? revenue, again provided a short-term fix, but the lump sums that the clubs received were not invested for a rainy day. Without any restrictions on how the clubs could spend it, it was largely used to pay off debts.

And hopes that the private equity firm would grow the size of the pie in order to overcome the loss of almost a third of the clubs? commercial revenue never came to pass.

Professional rugby has flirted with other broadcasters such as Amazon, but without the interest of Sky Sports in competing with TNT Sports, who have taken on the Premiership rights from BT, there no longer exists the kind of TV deals to allow the clubs the chance to earn their way out of trouble.

Some leading figures would argue that player salary costs remain artificially high, and given their proportion of running costs, ultimately the game?s financial woes could be solved with a 20 per cent cut. But next year the salary cap is due to rise from ?5 million to ?6.4 million. And those pushing for the increase argue that given the financial draw of the Japanese league and the French Top 14, it is already a struggle to keep the best talent playing in England.

The concern is that this latest cash injection, if it comes off, will again ease short-term issues, but this time with the political, moral and ethical baggage of accepting Saudi cash.

The finer details of the deals are not yet known but selling a 10 per cent stake would mean that the clubs would be forgoing 37 per cent of their commercial revenues. What might seem like a good day today could catch up with them in several years.

Attendances have been encouragingly strong this season, there has been a positive response to the 10-team league and the concentration of resources has improved the quality and made clubs more competitive in Europe.

But securing professional club rugby?s future remains all about the next big broadcasting deal. Numbers are currently being crunched to see if the value would increase with the creation of an Anglo-Welsh or British and Irish League, but even if it did, it would be a one-time uplift.

The sad truth is that while the latest investment may be small beer for the Saudis, it is unlikely to solve professional club rugby?s financial woes.

[Robson9]

The most obvious case of sports washing imaginable.

With football you could at least argue there was genuine interest in the sport in Saudi. Rugby? Cone on now

[NellyWellyWaspy]

The most obvious case of sports washing imaginable.

With football you could at least argue there was genuine interest in the sport in Saudi. Rugby? Cone on now

Given that quite a lot of Saudi princes are educated in our fair isles, it is a fair bet that most will have more than a passing acquaintance with rugby.