Rainbow Cup

New equity partner: Will WP Rugby's top brass be prepared to cede control?

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WPPR chairperson Ebrahim Rasool and Stormers coach John Dobson during an online media briefing on 25 May 2021. (Photo by Ashley Vlotman/Gallo Images)
WPPR chairperson Ebrahim Rasool and Stormers coach John Dobson during an online media briefing on 25 May 2021. (Photo by Ashley Vlotman/Gallo Images)
  • A big question on Cape rugby fans' lips is whether WP Rugby's top brass would be prepared to cede control to an equity partner.
  • This comes after it was revealed that the union was in discussions with two potential investors.
  • WPPR chairperson Ebrahim Rasool says they can't ignore "the primary decision about dilution and selling off shares".

The big news out of Cape Town this week has been WP Rugby's revelation that it was in discussions with a potential new equity partner.

Ebrahim Rasool, the chairperson of the union's professional arm, said in a press conference on Tuesday that they were in discussions with two potential investors.

The Cape union recently made headlines when it turned down a deal with American consortium, MVM Holdings, who subsequently bought a majority stake in WP's coastal rivals, the Sharks.

A major talking point for some time in Cape rugby circles has been the relationship between the union's amateur arm, Western Province Rugby Football Union (WPRFU), and the professional arm, Western Province Professional Rugby (WPPR).

There's the viewpoint that the WPRFU has hamstrung the union with its reluctance to relinquish power, with some believing the MVM deal fell through because the amateur arm refuses to cede control.

When probed on this issue and whether the WPRFU would accept an equity partner to come on board, Rasool responded in diplomatic fashion: 

"The union being the shareholder has to have a primary discussion about diluting its shares and whether it cedes control over the company. But alongside our negotiations with potential equity partners is a negotiation between the company, represented by the board, and the shareholder, represented by the Western Province Rugby Football Union, about reviewing the memorandum of incorporation," he said.

"And that I think are the two steps that were missing in our previous rounds of discussions that we have had. So, we can't get away from the primary decision about dilution and selling off shares from the union to an equity partner.

"The good thing is that both the president (Zelt Marais) and I are engaged in all of the discussions that are going around and that would hopefully minimise any kind of politics that could be involved."

Rasool added that they'd be better prepared this time around when dealing with a new potential equity partner.

"I think the major shift from the MVM experience to the current one is that with the MVM one we were basically reactive. Someone came along and said 'I want 51% and here is $6 million, take it or leave it'.

"In this case we are doing all the proactive precursor steps. What is the brand worth? What is the union worth? What is its projected income? How does that affect the value? And then from there to say, 'okay, this is the evaluation of the brand, then what are the kind of percentages that we would want?'.

"We've even begun to have a discussion about whether we are prepared to cede control of the union. I'm not saying that's the decision that we've made but this is the discussions we're having which we didn't have before because 51% caught us like dear in the headlights.

"Now we're having a proactive discussion about the implications if we were to give control... whether the shareholder that we currently have - the Western Province Rugby Football Union - how much it would want to dilute of its 100%.

"So, we're having all of these kinds of discussions now and we will put this into the wash with our negotiations with potential equity partners. I think we'll be much better prepared for such a discussion and I think it's a discussion whose time has come... our backs are away from the wall and I think that we are having a blue sky decision about where we want to go with regards to this."

The union has also been searching for a new CEO since Paul Zacks resigned in January last year.

Rasool, though, said the search for a new CEO was temporarily suspended as negotiations with the potential investors continue.

He said if they do decide on a new CEO, it would be done in conjunction with the new equity partner.

"Preferably it will be a joint effort in which their criteria and our criteria will meet up. Our criteria is about the brand, the culture, the depth and grassroots of Western Province Rugby, which is its traditional strength.

"Theirs would be much more related to the bottom line... somewhere in between there could be a sweet spot in which we find each other in this.

"But I do think it would be bad faith if we were to go ahead, push ahead with our process, appoint a CEO and then incur financial hazards after that or drive away a potential equity partner," Rasool said.

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