Super League clubs reject private equity proposal

[Rupert Prince]

2 hours ago, GUBRATS said:

Have you ever set up a new start business ? 

I have , I did it to make me rich , me , nobody else , just me 

Hopefully your business grows and so does your employment, so your employees earn a living too. According to how brilliant you and you staff work you can sell shares in your business to the public.

Private Equity companies invest in companies that are not publicly listed businesses.   When companies "go public", in order to receive investment, they are owned to a varying degree by their shareholders.  

The point is it is irrelevant whether the investment is public or private... the point is that the investors wish a return on their investment... and that investment then increases the value of the return to all its shareholders including the companies or entities that received investment.

Very often, whether private or public equity, the investors and beneficiaries are pension funds

As far as RL, or more specifically Superleague, then Private Equity, perhaps the Venture Capitalist end of the market, then their interest is in taking a 'more mature' product and growing it... using the skills and investment they have to grow the product.  This is to the benefit of the 'immature' product.  

The best mind seen to gravitate to PE companies... but of course no doubt some investors are better than others.

The issue is does RL want to stand still and in the process be bypassed by everyone else?

[The Future is League]

14 hours ago, Blind side johnny said:

Back to a fundamental: PE don't just take a stake in an organisation then remove a % of the income from that organisation to get their return. They inject certain skills and expertise in order to increase the value of that said organisation in order to increase their own income, as well as that of the sport.

The thinking should be what exactly would they have done to bring about that increase in value and what prevents SL from doing the same job itself, especially if it had that £750k to kick start the process? In my naive imaginings this was the whole point in creating a separate SL operation in the first instance. Simply bringing in PE is the easy way out I believe.

Short term gain. Long term pain.

[Tommygilf]

I don't have particularly strong opinions on PE either way, I can see pros and cons, though I'm probably in the more conservative camp towards it.

What I do have strong opinions on is Elstone chucking money about like he's still at Everton in the Premier League, and especially when it is on pointless projects. I'm not saying there that PE is a pointless endeavour, but that with the current SL chairmen having the deciding vote it may well have been a forgone conclusion. Much like the debacle over the Toronto vote, I would not be surprised if most chairmen hadn't already had their minds made up on PE 6/12/18 months ago and haven't changed their opinion since.

If that is the case, its nearly the entirety of Leigh's extra central distribution spent on a totally pointless pursuit. I imagine that would have funded a lot of side content too which has been cut this past year.

If that isn't the case, then Super League needs to be more open and transparent about its decisions and deliberations.

[Martyn Sadler]

11 hours ago, Dave T said:

It is surprising how difficult it is to get a decent breakdown of the previous rights. I know there is a link to an article on this site, but the numbers are all over the place.

On the contrary, the numbers are remarkably precise, as I revealed in League Express on 3rd February 2014.

I'll post that column again on our website later today.

There was also an interesting riposte by Ian Lenagan, highly critical of the deal negotiated by Nigel Wood, which I will also post.

One point worth pointing out is that when Nigel negotiated the £200 million deal, there was no commission payable to consultants, which would normally be around 15%.

[Rupert Prince]

1 hour ago, Damien said:

Or you could look at what a range of clubs have done what has been positive in that time too. St Helens have built a new stadium, Warrington have built a new stadium and have completely transformed the club from what it was two decades ago, Leeds have redeveloped their ground, Catalans have gone from strength to strength, Hull KR have grown and improved their ground etc. 

Widnes developed their stadium.  Where are they now? 

As for Headingly, the cost variously reported as up to 50 million...  A sum of some 35 million was brokered by Leeds Council to be funded by a private finance institution. (!) Legal and General.  According to the press the ground is then leased to the council for 42 years and sub let to the sports clubs.  (I must confess, untill I looked I thought the grounds were still owned by the sports clubs)

[Dave T]

13 minutes ago, Martyn Sadler said:

On the contrary, the numbers are remarkably precise, as I revealed in League Express on 3rd February 2014.

I'll post that column again on our website later today.

There was also an interesting riposte by Ian Lenagan, highly critical of the deal negotiated by Nigel Wood, which I will also post.

One point worth pointing out is that when Nigel negotiated the £200 million deal, there was no commission payable to consultants, which would normally be around 15%.

The problem is that from memory that article focused on distribution of funds rather than what Sky were paying for. For example - we know that Sky weren't paying millions for League 1 rights - Wood even confirmed they aren't included. 

They also showed that Sky had paid millions for internationals and cup - yet they had no international coverage. 

It would be interesting if you could address some of the q's around it once posted?

[Damien]

13 minutes ago, Rupert Prince said:

Widnes developed their stadium.  Where are they now? 

As for Headingly, the cost variously reported as up to 50 million...  A sum of some 35 million was brokered by Leeds Council to be funded by a private finance institution. (!) Legal and General.  According to the press the ground is then leased to the council for 42 years and sub let to the sports clubs.  (I must confess, untill I looked I thought the grounds were still owned by the sports clubs)

You listed a string of negatives to paint a false picture. I showed that there have been positives developed by the game in that time and the game hasn't just done nothing. That is without doubt.

Widnes having a new stadium isn't a bad thing, Leeds redeveloping their stadium isn't a bad thing. That is the type of progress you are saying RL doesn't make by itself. It does and it has. I am not really sure what you are trying to argue about but I'm not really interested in a circular argument.

[The Future is League]

I know I'm in the minority on this, but i think the Bundesliga is the best business model for sport in Europe. Here is an article from 2015, but the same principles apply today as far as I'm aware

https://liamsmithlaw.wordpress.com/2015/01/28/the-bundesliga-business-model-an-analysis-of-its-success-and-how-other-leagues-can-take-lessons/

[Dave T]

22 minutes ago, Martyn Sadler said:

On the contrary, the numbers are remarkably precise, as I revealed in League Express on 3rd February 2014.

I'll post that column again on our website later today.

There was also an interesting riposte by Ian Lenagan, highly critical of the deal negotiated by Nigel Wood, which I will also post.

One point worth pointing out is that when Nigel negotiated the £200 million deal, there was no commission payable to consultants, which would normally be around 15%.

The five-year deal breaks down as follows:

The amount being paid for club and international matches will be £182,200,000 in total.

Of that total, £146,760,000, or 80 per cent, will go to Super League clubs.

£14,576,000 or 8 per cent, will go to the twelve Championship clubs in the second tier.

£1,822,000, or one per cent, will go to the Championship One clubs.

£20,042,000, or 11 per cent, will be paid for Challenge Cup and internationals coverage.

For that, Sky Sports will broadcast 71 Super League games per season, 17 Championship games and one Championship one game, while they will also broadcast eleven Challenge Cup games.

BSkyB will also pay another £17,800,000 during the course of the contract, and that money will be paid for coaching and to the clubs’ charitable foundations, with the first payment of £100,000 per club being made in July.

------------------------------------------------------------------------------------------------------------------------------------

1 - 80% going to SL clubs. Is there an RFL cost out of that also?

2 - 8% going to Champ clubs - as above, are RFL costs in this pot?

3 - £1.8m for C1 - we know this wasn't a commercial value, just a distribution

4 - £20m for Cup and Internationals - how did this work as Sky didn't get any internationals and £4m per year for CC appears to be extremely excessive considering they don't even get coverage of the big games.

So what was the actual value of the Super League deal? Was it £147m or was it £200m? Or was it £147+14.6+1.8=£163m? That excludes Sky Try and Cup/Internationals.

 

[Sir Kevin Sinfield]

34 minutes ago, Rupert Prince said:

Widnes developed their stadium.  Where are they now? 

As for Headingly, the cost variously reported as up to 50 million...  A sum of some 35 million was brokered by Leeds Council to be funded by a private finance institution. (!) Legal and General.  According to the press the ground is then leased to the council for 42 years and sub let to the sports clubs.  (I must confess, untill I looked I thought the grounds were still owned by the sports clubs)

Leeds do own the rugby side of Headingley Stadium, the 42 year lease is solely for the North Stand, the ground including the other 3 stands are owned outright.

[M j M]

46 minutes ago, Rupert Prince said:

As for Headingly, the cost variously reported as up to 50 million...  A sum of some 35 million was brokered by Leeds Council to be funded by a private finance institution. (!) Legal and General.  According to the press the ground is then leased to the council for 42 years and sub let to the sports clubs.  (I must confess, untill I looked I thought the grounds were still owned by the sports clubs)

You need to be very precise around this deal. The "ground" which is being leased is the ground on which the new stand is built, not the entire stadium itself which remains under the control of Leeds and Yorkshire. Legal and General then paid for Caddick to actually carry out the redevelopment and the stands are leased back to the clubs until a set date at which point the whole lot reverts to club ownership.

The council involvement facilitated below commercial interest rates.

But Leeds are (were) very different to the rest of the league as they are effectively a very profitable events and hospitality business which, if needed, cross subsidised a Rugby League club. .

[gingerjon]

46 minutes ago, Dave T said:

The problem is that from memory that article focused on distribution of funds rather than what Sky were paying for. For example - we know that Sky weren't paying millions for League 1 rights - Wood even confirmed they aren't included. 

They also showed that Sky had paid millions for internationals and cup - yet they had no international coverage. 

It would be interesting if you could address some of the q's around it once posted?

Bingo.

Though, I am impressed that half a decade on, the article is being posted unedited as an example of quality reporting despite it being pointed out at the time, and regularly since, that it literally doesn't make any sense.

[whatmichaelsays]

1 hour ago, Tommygilf said:

I don't have particularly strong opinions on PE either way, I can see pros and cons, though I'm probably in the more conservative camp towards it.

What I do have strong opinions on is Elstone chucking money about like he's still at Everton in the Premier League, and especially when it is on pointless projects. I'm not saying there that PE is a pointless endeavour, but that with the current SL chairmen having the deciding vote it may well have been a forgone conclusion. Much like the debacle over the Toronto vote, I would not be surprised if most chairmen hadn't already had their minds made up on PE 6/12/18 months ago and haven't changed their opinion since.

If that is the case, its nearly the entirety of Leigh's extra central distribution spent on a totally pointless pursuit. I imagine that would have funded a lot of side content too which has been cut this past year.

If that isn't the case, then Super League needs to be more open and transparent about its decisions and deliberations.

I think this is where I sit on this issue too.

This whole topic of private equity has a "dog chasing a car" feel about it - we don't know why we're running after it, and we've no idea what we'll do with it when we catch it. 

Is the issue that the clubs seem split on this particular PE proposal, or PE as a concept? If it's the latter, what is the end goal here? What was the intention for any PE injection of capital and what is it that makes the clubs split on whether they can make that investment deliver a return? What does success look like?

£750k is a lot of money to explore an idea that the clubs seem luke-warm to at best and, as you say, it's an investment that could have been used to deliver a much greater return. 

[Dave T]

Hopefully this won't lead to a downward spiral of the thread, but this RU article was pretty decent on their recent deal:

https://www.rugbypass.com/news/cvc-rugby-a-toxic-mix/

 

[Tommygilf]

3 minutes ago, whatmichaelsays said:

I think this is where I sit on this issue too.

This whole topic of private equity has a "dog chasing a car" feel about it - we don't know why we're running after it, and we've no idea what we'll do with it when we catch it. 

Is the issue that the clubs seem split on this particular PE proposal, or PE as a concept? If it's the latter, what is the end goal here? What was the intention for any PE injection of capital and what is it that makes the clubs split on whether they can make that investment deliver a return? What does success look like?

£750k is a lot of money to explore an idea that the clubs seem luke-warm to at best and, as you say, it's an investment that could have been used to deliver a much greater return. 

Elstone has repeatedly said that the constant difficulty for RL was lack of financial resources (I don't exactly know what for though). IMO he'd be better served saying what he planned to use PE funding for: an in house production team, a London RL ground, a funded Welsh team like Catalans, an investment into the Oldham area, even if it was only as ambitious as funding the super league to above NRL levels for a few seasons at least it would be a vision. People can ridicule a vision, but some people can buy into it too. I understand completely the sentiment of "what for?" amongst some chairmen because frankly we are all sat here thinking the same thing. 

I'm inclined to think that a number of clubs were totally against, some were desperately in favour for, and the majority were lukewarm at best about PE as a concept. This proposal given its reportedly low figure probably confirmed those positions.

I think its a sign of poor leadership yet again on both a personal and financial level, where Elstone seems pretty powerless. The fact that a relatively expensive exploratory exercise that has resulted in absolutely nothing for the game was approved and (to keep this thread on topic) other funding was not is nothing short of a disgrace.

[Dave T]

10 minutes ago, Tommygilf said:

Elstone has repeatedly said that the constant difficulty for RL was lack of financial resources (I don't exactly know what for though). IMO he'd be better served saying what he planned to use PE funding for: an in house production team, a London RL ground, a funded Welsh team like Catalans, an investment into the Oldham area, even if it was only as ambitious as funding the super league to above NRL levels for a few seasons at least it would be a vision. People can ridicule a vision, but some people can buy into it too. I understand completely the sentiment of "what for?" amongst some chairmen because frankly we are all sat here thinking the same thing. 

I'm inclined to think that a number of clubs were totally against, some were desperately in favour for, and the majority were lukewarm at best about PE as a concept. This proposal given its reportedly low figure probably confirmed those positions.

I think its a sign of poor leadership yet again on both a personal and financial level, where Elstone seems pretty powerless. The fact that a relatively expensive exploratory exercise that has resulted in absolutely nothing for the game was approved and (to keep this thread on topic) other funding was not is nothing short of a disgrace.

I'm inclined to believe that clubs were open to the right deal (I also don't know what the voting rights would be for this to go through) - but anything that is so small as to be just a % of one round of TV deal is pointless as you are just taking a loan, paying it back over 5 years and losing control. If however it had been a £200m deal for 30% - we start to get into the realms of working out is it worth it. So I think the aversion to it is more around the offer. I'd be stunned if Elstone had the authority to spend that £750k without shareholder approval.

But the point about wondering exactly what this money for is the issue here. Nobody has been able to articulate what it could be spent on, even in our fantasy stuff on here it is hard to see how it makes sense. 

[M j M]

20 minutes ago, Dave T said:

Hopefully this won't lead to a downward spiral of the thread, but this RU article was pretty decent on their recent deal:

https://www.rugbypass.com/news/cvc-rugby-a-toxic-mix/

 

I had to be very careful to untick and object to every cookie and legitimate interests before proceeding to that website.

Once in however, and despite grinding my teeth at the repeated sight of fat people wearing shorts pretending to be athletes, the actual article is a good summary of why these deals need to be looked at very skeptically. If we really think we need short term funding (given the suggested five year pay back in the SL deal from the other party taking their cut of our tv money that's what it is) I can find some loan sharks with more favourable rates.

[Tommygilf]

33 minutes ago, Dave T said:

I'm inclined to believe that clubs were open to the right deal (I also don't know what the voting rights would be for this to go through) - but anything that is so small as to be just a % of one round of TV deal is pointless as you are just taking a loan, paying it back over 5 years and losing control. If however it had been a £200m deal for 30% - we start to get into the realms of working out is it worth it. So I think the aversion to it is more around the offer. I'd be stunned if Elstone had the authority to spend that £750k without shareholder approval.

But the point about wondering exactly what this money for is the issue here. Nobody has been able to articulate what it could be spent on, even in our fantasy stuff on here it is hard to see how it makes sense. 

Yeah I agree and that's where I think leadership is essential really. If you can pinpoint what you want to use the money for then it gives you an idea of what you are wanting to achieve and a vision of how to achieve that.

That, on a basic level, there isn't any such vision was always going to make such a decision difficult.

[Dave T]

53 minutes ago, M j M said:

I had to be very careful to untick and object to every cookie and legitimate interests before proceeding to that website.

Once in however, and despite grinding my teeth at the repeated sight of fat people wearing shorts pretending to be athletes, the actual article is a good summary of why these deals need to be looked at very skeptically. If we really think we need short term funding (given the suggested five year pay back in the SL deal from the other party taking their cut of our tv money that's what it is) I can find some loan sharks with more favourable rates.

Yes, it definitely jarred with me using the site, and I was reluctant to share, but I thought it was a reasonable article going into slightly more depth than what we maybe get in RL circles.

[Dave T]

21 minutes ago, Tommygilf said:

Yeah I agree and that's where I think leadership is essential really. If you can pinpoint what you want to use the money for then it gives you an idea of what you are wanting to achieve and a vision of how to achieve that.

That, on a basic level, there isn't any such vision was always going to make such a decision difficult.

I think if you are selling part of your game, you have to look ahead maybe 20 years and think about what you would spend £60m on that you wouldn't regret when you look back. 

Just clearing off debts is nice, but in 20 years when they have built up again, but you own less of your game, its a problem.

[Rupert Prince]

2 hours ago, M j M said:

You need to be very precise around this deal. The "ground" which is being leased is the ground on which the new stand is built, not the entire stadium itself which remains under the control of Leeds and Yorkshire. Legal and General then paid for Caddick to actually carry out the redevelopment and the stands are leased back to the clubs until a set date at which point the whole lot reverts to club ownership.

The council involvement facilitated below commercial interest rates.

But Leeds are (were) very different to the rest of the league as they are effectively a very profitable events and hospitality business which, if needed, cross subsidised a Rugby League club. .

Yorkshire Post say the money includes the South Stand as well... so I think I was fair to say that.  And it clearly says when the announcement was made that "the property" was leased to Leeds Council.

But Legal and General just lease back the stands and them give back the stands?  Really?  What about the 40 million?  L&G will want their money back and some sort of profit.  That money as I see it will have to come from the Council.  

So how much does Leeds own?

Best wishes to Leeds, but they have given something up in order to provide an investment to earn them something back.

[Rupert Prince]

1 minute ago, Rupert Prince said:

Yorkshire Post say the money includes the South Stand as well... so I think I was fair to say that.  And it clearly says when the announcement was made that "the property" was leased to Leeds Council.

But Legal and General just build the stands lease back the stands?  Really?  What about the 40 million?  L&G will want their money back and some sort of profit.  That money as I see it will have to come from the Council.  

So how much does Leeds own?

Best wishes to Leeds, but they have given something up in order to provide an investment to earn them something back.

I could not edit as far as I could see.. so I've had to repeat to edit... 'L&G build and lease back. And as I say they then want their money back

[M j M]

3 hours ago, Rupert Prince said:

Yorkshire Post say the money includes the South Stand as well... so I think I was fair to say that.  And it clearly says when the announcement was made that "the property" was leased to Leeds Council.

But Legal and General just lease back the stands and them give back the stands?  Really?  What about the 40 million?  L&G will want their money back and some sort of profit.  That money as I see it will have to come from the Council.  

Leeds and Yorkshire pay it. The reason for building these facilities was because Headingley, in normal times, throws off mountains of cash and this guaranteed more mountains of cash in the future by securing test cricket, making a major splash in the Leeds corporate market and expanding the capacity for the most regular single user (Leeds) who were often selling out the existing facilities. Paying back £40m over the period of the lease is, relatively, peanuts for the clubs - especially as they can make overpayments if they wish which makes the whole thing behave a lot more like a mortgage.

Leeds started out with something like £7m in the bank which they contributed before even turning to the financing side for the rest of it. The club have made a cash profit of between £1m and £2m every year but one over the past decade or more and the new facilities were starting to generate even more money.

Quote

So how much does Leeds own?

Best wishes to Leeds, but they have given something up in order to provide an investment to earn them something back.

I know you think you're making a point but, like with your comments on PE, you honestly don't seem to have the first clue.

Leeds own the ground from the centre of the North Stand concourse all the way to the southern boundary on St Michael's Lane. Leeds and Yorkshire keep all the income and pay off the financing arrangement used to redevelop the ground out of the regular cash surpluses the stadium generates. That's the business model, they have "given up" about as much as you do if you had a mortgage.

[Tommygilf]

2 hours ago, Dave T said:

I think if you are selling part of your game, you have to look ahead maybe 20 years and think about what you would spend £60m on that you wouldn't regret when you look back. 

Just clearing off debts is nice, but in 20 years when they have built up again, but you own less of your game, its a problem.

Yeah exactly. With RL clubs that is made slightly odder by the fact several run at a modest profit and their largest "creditor" is their owners through directors loans.

Now unless Elstone was advocating buying out all the clubs with PE money (for some unknown purpose), I still don't know what the point is.

[Martyn Sadler]

5 hours ago, Dave T said:

The five-year deal breaks down as follows:

The amount being paid for club and international matches will be £182,200,000 in total.

Of that total, £146,760,000, or 80 per cent, will go to Super League clubs.

£14,576,000 or 8 per cent, will go to the twelve Championship clubs in the second tier.

£1,822,000, or one per cent, will go to the Championship One clubs.

£20,042,000, or 11 per cent, will be paid for Challenge Cup and internationals coverage.

For that, Sky Sports will broadcast 71 Super League games per season, 17 Championship games and one Championship one game, while they will also broadcast eleven Challenge Cup games.

BSkyB will also pay another £17,800,000 during the course of the contract, and that money will be paid for coaching and to the clubs’ charitable foundations, with the first payment of £100,000 per club being made in July.

------------------------------------------------------------------------------------------------------------------------------------

1 - 80% going to SL clubs. Is there an RFL cost out of that also?

2 - 8% going to Champ clubs - as above, are RFL costs in this pot?

3 - £1.8m for C1 - we know this wasn't a commercial value, just a distribution

4 - £20m for Cup and Internationals - how did this work as Sky didn't get any internationals and £4m per year for CC appears to be extremely excessive considering they don't even get coverage of the big games.

So what was the actual value of the Super League deal? Was it £147m or was it £200m? Or was it £147+14.6+1.8=£163m? That excludes Sky Try and Cup/Internationals.

 

I've scheduled the original article to go out on our website at 6.00pm. You're right that the details in the article were about the monetary distribution. Sky were paying £200 million over five years, as as far as they were concerned no doubt they were buying the right to broadcast Super League, but the RFL, rather than Sky, decided how it would be distributed, which is why there is a significant sum of money for the Challenge Cup and internationals, even though Sky doesn't broadcast internationals.

Nigel Wood, as the then CEO of the RFL, clearly didn't think that Rugby League begins and ends with Super League.

I've also scheduled an article by Ian Lenagan responding to the deal that we published in the same issue.

It's quite interesting to see the points he made at the time.