Silver Lake and CVC are among the private equity firms looking at Rugby Australia, while Ticketek’s owner has bids from five interested investors.
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Several private equity firms have advanced talks over two of the most-watched transactions, a minority investment in Rugby Australia and the purchase of Ticketek-owner TEG. Permira, EQT, The Carlyle Group, Blackstone and KKR are pursuing TEG, while seven firms including Silver Lake, CVC Capital and Andrew Forrest’s Tattarang were shortlisted to make an offer to Rugby Australia, people familiar with the transactions told
The Australian Financial Review.
TEG and Rugby Australia intricately link the professional sporting world with live entertainment. And private equity wants a clip of merchandise sales, gate admissions and ever-lucrative broadcast rights. Broadcasters rely heavily on global sporting events, while sporting bodies are married to Ticketek and Ticketmaster’s approximately 85 per cent share of the local market.
A deal for TEG would involve about $1 billion in debt financing alone, people said, while Rugby Australia is after up to $300 million from a minority investor, this masthead
reported in April. Behind these transactions, meanwhile, is Jefferies. Led by Michael Stock, the US bank’s local outpost not only snared the mandate for Rugby Australia and TEG, Mr Stock advises Nine, the current broadcaster for rugby, and the bank worked on Silver Lake’s $200 million investment in New Zealand Rugby last year.
Bankers and private equity executives considered Mr Stock’s moves a masterstroke. The intersection of media, live entertainment and professional sports presented a welcome payday for the investment bank, which earns fees off advising on broadcasters and by bringing private investors into the dealmaking fray. One private equity executive who looked at TEG’s sale described these transactions as the “holy trinity” given the three-prong view of broadcast rights, merchandise sales and soaring ticket prices. “Private equity houses see entertainment as not necessarily counter-cyclical, but it can hold up in a more depressed economic environment,” said Daniel Natale, a partner with King & Wood Mallesons. “I think people’s discretionary spending on entertainment will stay stable over time. They still want to watch sports, and they will pay extra to go to concerts because they are treating themselves.”
Some private equity shops, however, were less keen. CVC and TPG Capital ruled out interest in TEG’s assets, while KKR privately dismissed rumours of interest in Rugby Australia, people familiar said.
One factor deterring potential investors is key money. Like a security deposit, TEG needs to pay millions of dollars in key money to venues to host events for a fixed number of years. These upfront costs are a heavy pill for a new private equity owner to swallow. Some would-be private equity buyers also believe competition will heat up. Los Angeles-based rival Anschutz Entertainment Group launched its ticketing arm AXS in Australia in February, to compete with Ticketek and Live Nation’s Ticketmaster. A third factor that has private equity scratching their heads is whether live event companies will hit their earnings limits in the next 12 months. Ticket sales soared in the last year after years of show cancellations. Since the world reopened, ticketing companies have cashed in on consumers yearning for live entertainment after stretches of COVID-19-induced lockdowns. Live Nation, for example, recorded $US3.1 billion ($4.6 billion) in revenue in the first quarter of 2023, up 73 per cent on the same period last year, while ticket sales are forecast to swell beyond 600 million this year from 550 million in 2022. Sceptics question whether ticketing giants can maintain such high growth as consumers pare back appetite for discretionary items like entertainment when mortgage repayments are increasing.
Broadcasting momentum
After almost a year of positioning, meanwhile, Rugby Australia’s capital raising efforts is in full gear. Dubbed “Project Aurora”, the proposed transaction would split revenue from sporting events like the Olympics and Rugby World Cup into one company, while match day and broadcast revenue would be placed in a new entity, Street Talk
reported in April. Incoming Rugby Australia chief executive
Phil Waugh has big plans to revive rugby’s fortunes, including creating a Western Sydney academy. However, his ambitions are contingent on raising about $250 million. “There’s no doubt we need to have more reserves to invest to get the outcomes that we’re after,” he said last week. Rugby Australia made a $4.5 million operating loss in 2021 on revenue of $98.6 million, up from a $27 million operating loss in 2020. But it needs a cash injection to ensure long-term financial sustainability.
Silver Lake is viewed as the front-runner to partner with Rugby Australia since it invested $200 million in New Zealand Rugby last June, but there are still other alternatives: Tattarang, or CVC. Bids are expected to be submitted by the end of July. Rugby Australia signed a $100 million, three-year broadcast rights agreement with Nine in November 2020, and newly extended this deal by another two years. The value of this could increase over time as Mr Waugh pursues his vision of more consistent, high-performing games. Broadcasting this year’s men’s Rugby World Cup in France, combined with an expectation fans will frequent club matches and the British and Irish Lions tour of Australia in 2025, has insiders confident a deal will progress.