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Desire for power undermines Stormers’ equity deal

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Craig Ray is the Daily Maverick sports editor.

MVM is not a small-time player, yet the WPRFU has treated it like it treats all its stakeholders in Cape Town and South Africa – with disdain.  

First published in DM168

By the time you read this, MVM Consortium, the American group interested in buying a stake in the Stormers for $6-million (R100-million), might have walked away from the proposed deal.

After months of frustration with its dealings with the Western Province Rugby Football Union (WPRFU), which hasn’t even resulted in the full financials being handed over, patience has worn thin.

There was a crunch meeting between the parties last night, which will decide the way forward in this drawn-out flirtation.

The consortium is headed by South African expat Marco Masotti, who made his life in New York where he is a respected partner in a big Manhattan law firm. He has formed a consortium with some deep-pocketed associates, including the president of entertainment management agency Roc Nation, Michael Yormark.

Roc Nation represents Siya Kolisi and Cheslin Kolbe, footballers Kevin de Bruyne and Jerome Boateng, as well as recording artists Rihanna, Alicia Keys and Christina Aguilera. It has a deal with the NFL and produced the 2020 halftime show, one of the most watched events in the world, and next week will unveil a top South African cricketer as a new client.

MVM is not a small-time player, yet the WPRFU has treated it like it treats all its stakeholders in Cape Town and South Africa – with disdain.

WPRFU president Zelt Marais is now under pressure because Yormark, a tough New Yorker with 28 years’ experience negotiating big deals in a competitive US market, has called out Marais and by extension, the union’s hierarchy, for their stonewalling tactics.

Masotti is the head of the consortium but it’s clear that Yormark is the group’s attack dog. To put it bluntly, he takes no bullshit and calls a spade a shovel. He is over playing nicely with the WPRFU. The WPRFU must agree to selling a 51% stake or the deal is off.

Marais has tried to claim that the union is not desperate for MVM’s money, that the 2021 Lions tour and the new PRO16 tournament will sustain the club. He is presenting an image that if MVM walks away the union will survive, but that is fanciful thinking.

For a start, the 2021 Lions tour is still not guaranteed to happen. The global pandemic is having a second surge in Europe and it could resurface here at any time. If fans are still barred from attending matches in July 2021, there is no way the Lions will tour. A massive amount of the income is derived from ticket sales.

Private equity consortium CVC is buying up rugby properties across the globe, which includes PRO16. The inclusion of four South African teams in that competition, the Stormers among them, has added value to the tournament. But with the uncertainty around Covid-19, a new PRO16 broadcast deal is still being thrashed out, and again, there is no guarantee that it will be as lucrative as hoped.

Two of the Stormers’ major revenue streams are far from certain.

Which is why, R100-million on the table from well-heeled investors should be considered good business in this economy. Globally, rugby is teetering on the brink of collapse after the pandemic cut leagues and matches. Having a war chest with R100-million in it is a good way to ride out the tough times.

But for their purchase of the Stormers (MVM are not trying to buy the WPRFU – only a stake in the professional entity), the Americans want a 51% stake. They want a controlling interest.

Marais and his cohorts do not want to give up that control and through the media (including Daily Maverick) the WP president has presented a range of reasons why, while denying it’s about control.

He said buying a 51% stake was not allowed in the WPRFU constitution, which raises the simple question: Why did they approach an equity partner if it was not allowed? Marais then said the selling of a majority stake would fall foul of the SA Reserve Bank’s policies. Five minutes of investigation and a short call to a respected tax consultant debunked that myth.

It can be done; all it needs is to jump through a few regulatory hoops. It’s nothing insurmountable. Marais has also used the excuse that MVM is undervaluing the Stormers. But he has never once said that the $6-million was too little. Andre van der Veen, the former director who was mandated by the board to go out and find an investor, was told that R100-million was what the union wanted. He delivered, and has subsequently been ousted after expressing his unhappiness with the WPRFU’s shoddy handling of the negotiation.

Are the Stormers undervalued at R100-million? Maybe, but this is a depressed market and MVM only wants a 51% stake of the Stormers – one piece of the entire WPRFU pie. There is also the possibility of the consortium putting in more capital down the line.

MVM is prepared to invest, but it wants the Stormers business to be successful and ultimately earn it a return on its investment. This is not a loan, or a handout. MVM is in it to maximise the Stormers’ potential, on and off the field, and to do that, the consortium wants the controlling say.

But in the sometimes surreal world of WP Rugby, the union wants R100-million and the freedom to spend it as it sees fit. The investor, not unreasonably, wants the ability to decide how its money is used.

If, and more than likely when, the Stormers’ deal finally falls through, Masotti can expect a call from the Sharks. They are willing to talk. DM168

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