Independent audit firm to review failed equity bid

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SA Rugby has commissioned a governance review by an independent audit firm into the failed R1.4-billion equity bid by the Ackerley Sports Group.

The American consortium’s proposal, which would have given them a 20% stake in SA Rugby’s commercial rights, failed to meet the 75% threshold it required to receive approval of the Saru general council in December.

Seven of the 13 voting unions – including the Bulls, Sharks and Lions – voted against it.

READ: Unions reject SA Rugby equity deal

On Friday morning News24 revealed that SA Rugby CEO Rian Oberholzer had been appointed as the sole director of a private company called “Win By One” in July last year – six months before Saru’s general council rejected ASG’s equity deal, titled “Win By 1”.

ASG’s original agreement also reportedly included a controversial 15% commission payable to Jordan & Associates, a company owned by former Formula One boss Eddie Jordan. ASG reduced the commission to 8% following a public outcry.

According to an SA Rugby press release, Saru’s executive council met later on Friday “to discuss stakeholder concerns raised by certain media reports around technicalities relating to the transaction.

“The recent questioning related to the establishment of a company, Win by One (Pty) Ltd in SA, and the sub-division of the fee that would have been payable to the international brokers who worked on the deal.

“The independent review will be focused on both elements,” it added.

MORE: SA Rugby gets equity offer from Rupert and co

In its explanation of the creation of Win by One (Pty) Ltd, SA Rugby said:

• The implementation steps of the transaction, should it have been approved, would include the setup of commercial entity owned by both shareholders. As part of preparation, Saru set up the Special Purpose Vehicle (SPV), named Win by One, which was 100% owned by Saru as per standard commercial practice.
• The equity partner would acquire its shareholding from the SPV.
• The SPV would be a South African tax-registered company that could immediately perform all the functions required of the planned new company. This structure was advised at all steps of the process with all stakeholders, including in media advisories.
• For convenience's sake that entity was called Win by One (Pty) Ltd. The Win by One LLP company established by ASG is a separate entity in an international jurisdiction in which Saru has no interest.
• The creation of the SPV a purely technical process and was performed by BDO for SA Rugby on the instruction of the company secretary. The power to create such an entity is covered by clauses 7.16 and 7.17 of the constitution.
• Such entities require the naming of at least one director until the board of the new company would have been constituted. As the accounting officer of SA Rugby, the CEO was automatically named as the sole director of the new company as is business custom and practice.

SA Rugby explained the establishment of the amount of the transactional costs and the sub-division of the fee as follows:

• Provision was made for a maximum of 15% costs towards the equity transaction.
• Of which an estimate of a maximum of 5% was identified to cover the transactional fees for lawyers, mergers and acquisitions specialists, audit and tax advisers among others.
• The company that comprised the agents and associates who introduced Saru to the transaction presented the commission structure to Saru.
• It included an agreement reached with the brokers for a success fee of 10% should the deal go through.
• The success fee was renegotiated to 8% with the brokers before it was presented to the general council.
• The division of the fee among the parties in the event of success was at their discretion.
• The agreement and fees went through all the necessary approvals and governance structures according to SA Rugby’s policies.
• As the proposal was not approved no fees have been paid to the brokers.
• The professional fees incurred by SA Rugby are to be carried by SA Rugby.

Photo: Grant Pitcher/Gallo Images

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