When a company reports a profit after turning the corner from making losses during Covid, there’s usually a jauntiness to its financial statements, rather than desperation about cash. Not so, though, for the South African Rugby Union (Saru).
Unlike New Zealand Rugby, Saru was profitable in 2023, having presided over successive Springbok World Cup victories in 2019 and 2023. Yet Saru’s annual report commentary reads like a funeral dirge.
“We have essentially zero reserves and each year is a struggle to make ends meet to fund the development and operations of teams, competitions and member unions,” Saru CEO Rian Oberholzer tells the FM.
Saru’s most recent financials show that revenue and other gains amounted to R1.813bn, while operating expenses exceeded that by R3m. With finance income added, the union managed a net profit of R8.25m for 2023. Not spectacular, but better than the previous year’s R15.28m loss and much better than New Zealand Rugby’s NZ$8.91m (R94.7m) loss.
One accepts the need for reserves in an uncertain world. It is also true that Saru has to compensate for the extreme weakness of the rand against the pound, euro and yen. It has to spend lavishly to prevent an exodus of young talent from South Africa’s school-rugby production line, the best in the world. It must keep a critical mass of established players in South Africa so that the provincial franchises can field Springbok stars and remain competitive. And it must fund costly domestic tournaments such as the Currie Cup, which remains prestigious but attracts relatively few paying spectators.
What is not at all clear is why, in its quest for big money, Saru seems hell-bent on doing a deal with a little-known US private equity company, Ackerley Sports Group (ASG). It claims ASG will take the Boks global and substantially grow the rugby business in South Africa.
And what does ‘taking the Boks global’ mean? In the rugby world, they are already global
But ASG has never taken a sports brand and made it famous anywhere, let alone across borders and oceans. And the Boks have a Nike logo on everything from their jerseys to their shorts and socks and other gear — so there is already a huge foreign company involved. And what does “taking the Boks global” mean? In the rugby world, they are already global.
Of course, rugby, unlike football, is not a global game. But ASG, a tiny Seattle company of seemingly no fixed abode, is not likely to change that. It does not have international experience or even an existing sports portfolio. And there’s no sign that it has the reported $75m (R1.3bn or so) needed to do the deal that Saru wants.
But, says Saru, negotiations with ASG have progressed and it’s hoped that a formal offer can be presented to the general council before the end of the year. A deal would give Saru “ring-fenced funding to weather financial storms of the scale of the Covid pandemic; it would provide a short-term cash injection to meet 2024’s commitments; it would provide a capital fund to launch a new era of fan engagement and digital marketing, and unlock new markets, platforms and relationships, considering ASG’s existing sports portfolio”.
But could this deal really do all that? The hitherto unheard-of ASG first said in February it was going to invest in the Springboks. Turns out the headline of its first media release was a bit misleading — Saru said ASG is going to invest in a subsidiary that Saru will set up to house the Springboks, among other brands.
“It will be South African Rugby’s commercial arm, a subsidiary to the mother body,” the union says in its 2023 annual report. “South African Rugby’s commercial activities of selling broadcast and sponsorship rights and running events will continue as before, only in partnership with a company with international experience who believe that our revenues are capable of meaningful increase.”
Mysterious moves
It’s no wonder ASG was unknown when the rugby deal was proposed in February — it was formed only two months before the Springbok announcement. Its static website, built using WordPress, consists of one page with an e-mail address and a connection to its LinkedIn profile. That profile had 325 followers, as of October 17. It lists between two and 10 employees and gives just one link, which goes back to its one-page website.
According to its own initial statement, ASG is an arm of Ackerley Partners, a business it said was started in 2002. ASG went on to say that Ackerley Partners — formed 22 years previously, remember — had owned all or a part of a number of professional sports franchises for more than 40 years. But if that were true, then Ackerley Partners would have started business in the 1980s, when its founders were still teenagers.
Questions sent three times to ASG’s e-mail address requesting comment went unanswered.
As for Ackerley Partners, its website also seems to have been built with WordPress and presents only one page. Questions sent three times to Ackerley Partners’ e-mail address requesting comment went unanswered. Phone calls weren’t returned.
Ackerley Partners’ web page gives the business address as 601 Union Street, Seattle, Washington. But its LinkedIn page, with just 174 followers, gives the address as 1301 2nd Ave, Seattle.
Google Maps’ image of 601 Union Street doesn’t show an office block. Using the other address, four blocks away, Google Maps shows there’s a multistorey building at 1301 2nd Avenue. The name on the outside is the “Russell Investments Center”. An executive vice-president at CBRE, the real estate business that oversees leasing at the Russell building, says in an e-mailed response to questions that Ackerley Partners moved out of the building more than a year ago and didn’t leave a forwarding address.
PitchBook, a Seattle-based organisation that collects company information and provides financial data and software, names the twin brothers, Ted and Chris Ackerley, and their sister Kimberly Cleworth, as co-founders of Ackerley Partners. It says the company has executed 22 investments since 2002 and exited 17.
Only one of the investments appears to have been directly in a sporting enterprise: a minority stake in the UK second-tier football club Leeds United, taken in November last year. That hardly equates to proven international sporting brand expertise.
Some of its other investments include Howcast, which describes itself as “the best source for fun, free and useful how-to videos and guides”; Limeade, a provider of employee software solutions; and the now defunct Official Nascar Members Club.
Private equity and venture capital firms can be secretive about the companies they’re involved with. But from the information available, Ackerley Partners seems to be a long way from the business that both ASG and Saru described. Yet Oberholzer says Saru has completed its due diligence process.
Here’s another claim by ASG that isn’t borne out when cross-checked. Earlier this year, ASG said Ackerley Partners owned all or part of several professional sports franchises in US basketball, ice hockey, soccer, and rugby. At the time Saru confirmed these claims.
All of this was misleading.
It seems the Ackerley siblings are actually trading on the memory of their father, the late Barry Ackerley. He founded the Ackerley Group and in 1983, when he was already known as a successful billboard entrepreneur, he bought basketball’s Seattle SuperSonics for $21m, according to a report in The New York Times.
It was the patriarch’s business, not Ackerley Partners, that had investments in two basketball teams and one indoor soccer league — but not in ice hockey and rugby.
Barry Ackerley’s enterprise no longer exists. His Ackerley Group, which was publicly listed, was sold to Clear Channel Communications in 2001 in a share deal initially valued at $483m, with Clear Channel also assuming $294m in Ackerley debt — a figure that later rose to $319m, according to US federal filings.
Ackerley snr died in 2011. In reality, his company wasn’t focused on sport, and its sideline business in sport was making a loss, the 2001 annual report shows. The sale of its sports investments helped to cover some of the group’s debt. It seems not much money was left to filter down to any business the children were running.
What about ASG’s claims about investments in rugby and ice hockey teams?
A check through Ackerley Partners’ claimed deals on PitchBook reveals that the Seattle Seawolves (a rugby team), the Coachella Firebirds (ice hockey) and the Seattle Kraken (ice hockey) are not listed as investments. A check of those teams’ websites doesn’t show Ackerley Partners as investors.
Instead, Ted Ackerley lists himself as an investor in all three on his LinkedIn profile. His brother, Chris, lists the same three. Their sister, Kimberly, doesn’t list investments in any of these sports franchises on her profile. It appears the brothers invested in the sports ventures privately and not under the auspices of Ackerley Partners.
Clear as mud
In all of this there is no mention of Bill Ackerley, son of Barry’s wife Ginger from a previous marriage, who had been adopted by Barry as a child. In 1998, Bill went his own way, the Seattle Times said. He’d been co-president and COO of the Ackerley Group sports and communications units, but retired at age 37.
Bill is now the executive director of the Western Washington chapter of the Golf Course Superintendents Association of America. His name doesn’t appear in connection with any of the ventures of his adoptive siblings. Questions e-mailed twice to Bill Ackerley went unanswered and a phone message wasn’t returned.
When Clear Channel bought Barry’s company, the Ackerley Group’s 2001 annual report showed he was the chair and CEO, and Ginger was a director. Chris Ackerley, at age 32, was made president of the company in July that year (though his LinkedIn profile says this happened in 1999) after joining in 1995. Ted had been appointed a director in 2000 after running a custom cigar company and an in-flight entertainment business. Kimberly also joined the board in 2000. Immediate family members made up 50% of the board of directors. After the sale to Clear Channel, which was completed in 2002, Ted, Chris and Kimberly set up Ackerley Partners.
Then there’s the money. Soon after the planned Springbok transaction was announced, media reports said ASG might not have $75m in upfront cash for 20% of the venture that Saru was to set up. To do the deal, ASG said in February, it would invest in a commercial rights corporation (CRC).
In the context of sport, a CRC typically manages the broadcasting rights, sponsorship deals, match revenue and merchandise licensing for a team. ASG’s proposed CRC would hold all current and future revenue-generating assets of the Springboks and Saru. The CRC will be majority owned by Saru, with ASG taking a “significant minority interest”.
At the same time as South African news outlets were reporting on Saru and ASG, a US news publication, Sportico, said ASG was creating a special purpose vehicle (SPV) and intended raising capital. Sportico said the SPV’s name was Win By One, referring to the Springboks’ single-point victories in the 2023 Rugby World Cup.
It may be that the CRC and the SPV are one and the same. According to a PwC report about SPVs in general, SPVs can reduce red tape and provide tax benefits and legal protection — but they can pose reputational and financial risks to the parent firm, in this case Saru, and can lack transparency.
When it comes to money, the Ackerleys may have another way of accessing funding. Chris is a director of a special purpose acquisition company (Spac) called ESH Acquisition Corp, which launched an IPO in July last year. Spacs are shell companies that have no assets; they raise money by listing on stock exchanges and then hold on to the cash until the right asset comes along.
ESH, which is listed on the Nasdaq Global Market, has a static web page that says to check back “soon” for the launch of the site, but it started up 15 months ago. In its 2023 annual report it said that, as of December 31, ESH had investments held in its trust account of $120m, consisting of US government bonds.
Information from the US Securities & Exchange Commission shows ESH was late with one of its filings in this year. Its most recent filing was a report for the quarter ended June 30, which showed its trust account had grown to $122.2m and that no money had been disbursed for investments. Questions sent to Jonathan Morris, the listed ESH contact, went unanswered.
Asked about the possible sources of ASG’s funding and the risks inherent in private equity, Spacs and SPVs, Oberholzer says Saru is “more than comfortable with the investors in the consortium” and that it is not its place to divulge whether or not ESH would play a part in the deal.
“Private equity investment is very different to a straightforward sponsorship,” he says. “As well as bringing far greater investment than a sponsorship, private equity can recapitalise a business while such an international partner opens pathways to global networks and opportunities in new markets to drive greater revenues both for the sport and for the new shareholders.”
That may well be true — but why not tell us whether ESH would play a part, and who might be the investors with whom Oberholzer is “more than comfortable”?
Following the money
It’s not as if Saru is a babe coming out of the amateur rugby woods. Those days are long gone. Saru already uses the internationally renowned Wasserman — a more than 20-year-old Los Angeles-based sports marketing and talent management company with a division devoted to rugby — to further its global ambitions. And Saru does intend using Wasserman to try to double its sponsorship revenue by 2027, according to Oberholzer. This was “regardless of the private equity investment and our strategy to achieve that target is already in operation”, he says.
At one point there were two private equity contenders for a stake in Saru.
CVC Capital Partners, which has a real website, global clients, almost €200m in assets under management and a public listing on Euronext Amsterdam, was rejected in favour of ASG. Former Saru CEO Jurie Roux was trying to land the CVC deal after he’d left the organisation. Deal fees would have no doubt been significant and Roux does, according to the courts, owe Stellenbosch University R37m.
Oberholzer says that both entities pitched to Saru members in December. The member unions then unanimously approved ASG as the preferred bidder, following presentations that included details on success fees and transaction costs. The 15 provincial member unions together form the highest authority in rugby in South Africa.
Asked about the size of the deal fee or commission for an ASG transaction, Oberholzer says only: “That information has been shared with those who need to know — our members.” It is not clear why all the other stakeholders in South African rugby do not need to know.
Then, between March and June this year, Saru held information sessions with all member unions, during which it says all questions were addressed. In October, further sessions took place with “members in five separate groups to thoroughly examine the proposal”.
It is always useful to try to follow the money. Saru does say that “no employee, elected official or consultant of SA Rugby will be paid any form of commission, bonus, incentive, finder’s fee or any other form of remuneration on this — or any other — equity deal. A commission of 15% — including the transactional costs incurred by legal, tax and mergers & acquisitions advisers — is payable to third parties for their professional services and as commission.”
That is one heck of a commission — 15% is high by any standard. Who are these third parties? If it is Jordan & Associates, as reported, why are they needed to arrange a deal that one would think Saru had the capacity to do itself? Might another third party just possibly be a former employee of Saru?
Other details not divulged when Saru was questioned directly were the size of the sponsorships from Nike and MTN. The MTN contract runs out next year and Oberholzer says Saru is in renewal conversations with all partners whose contracts are expiring. But Saru does not seem optimistic that the big money might come from current partners, judging by Oberholzer’s statement this month: “We have actively sought a partnership with an organisation possessing the platforms, networks, and relationships to enhance our commercial value.”
But ASG hasn’t yet branded anything, as far as it’s possible to tell. It doesn’t seem to have a platform or a network — only a minority relationship with an English football club that has seen better days.
There’s one more piece of the puzzle that demands attention. Timothy Kirkwood is named as ASG’s London-based partner overseeing the Saru transaction and was described in ASG’s initial statement as having “a prolific background in international finance and investment banking”.
Kirkwood’s LinkedIn profile says he has a BA in Japanese from the University of Texas in Austin. His work experience appears to have been unrelated to the business of sport: a real estate finance company in Japan, principal at Shawnee Western Inc for four years, and currently a partner at Helios Capital Ventures. He has been a full-time partner at ASG since October last year.
The trouble is that apart from ASG, it’s hard to find verifiable links between Kirkwood and the other three companies named above. Questions sent to two e-mail addresses directly linked to Kirkwood and another to ASG marked for Kirkwood’s attention went unanswered.
Such opacity on the part of the Ackerleys and Kirkwood, key players in a potential huge equity deal, may be innocent — but at best it looks unprofessional and at worst suspicious.
The big question is this: if the 15 Saru member unions were unanimously in favour of the ASG deal in December 2023, why were many more discussion and information sessions needed this year? And there is certainly no unanimity now: seven of the unions, including the big four (Stormers, Sharks, Bulls and Lions), wrote a strong letter objecting to a meeting last week that was supposed to finally approve the ASG deal. “While we understand and support the need for Saru to explore opportunities for international brand growth,” says the letter, “the purported contribution and involvement of ASG in these efforts remains unclear.” The meeting was postponed.
What changed? Were the unions misled in the earlier sessions? Have they since discovered information about ASG and/or the deal that has caused them to withdraw their support? And who stands to benefit directly from the proposed deal? Who are the private investors who could well end up calling the shots in South African rugby?
As Johnny Nash put it in the hit song of the 1970s, There Are More Questions than Answers: “The more I find out the less I know.”
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