A United States tech giant has offered New Zealand Rugby nearly half a billion dollars for a 15 per cent share of commercial rights, a report says.

The offer has come from US firm Silver Lake, which part owns Manchester City’s owner City Football Group and is known as one of the world’s leading technology investors and requires the approval of New Zealand’s provincial rugby unions.

Silver Lake’s minority stake could range from 10-15 per cent of commercial rights valued at $3.1 billion, NZME reported on Wednesday.

A decision is unlikely to be taken before NZ Rugby’s annual meeting in April. The NZ Rugby Players’ Association, as well as former All Blacks players, coaches and Black Ferns are also to be consulted, the report said.

Last year, NZ Rugby chief executive Mark Robinson said the company was “keeping its options open” on private equity as the game enters a period of dynamic change.

NZ Rugby is consulting with its stakeholders but a spokesperson said on Wednesday evening there was no further comment to make at this time.

“As we have said [previously], we are on a path to look at what an investor partner for New Zealand Rugby might look like – which is a very exciting prospect for us.”

Recently, Stuff spoke to Colin McKinnon, the executive director of NZ Private Capital, to get a clearer understanding of how the industry operates and why NZ Rugby is open to investment.

How does private equity work?

Private equity is something of an umbrella term to cover different types of investment, McKinnon says. For example, it is capital that could be used to buy out an entire company or to pump into a struggling business. That is not the case with NZ Rugby, McKinnon says, which would be seen as a “growth opportunity” by investors such as Silver Lake or CVC [Citicorp Venture Capital]. In other words, they believe NZ Rugby could make more money that it currently does.

OK but how would it work in the context of NZ Rugby?

NZ Rugby and a private equity firm such as Silver Lake would create an entity to handle commercial assets, and private equity would take a share of this, perhaps 10-15 per cent. “At the moment NZ Rugby funds itself through a different kind of partner,” McKinnon says. “They have got some big sponsors and when they get capital from those sponsors they give them something in return. A similar thing happens with a private equity company. They invest some capital and for that capital they take on a share in the risk in the business but they are also expecting through their help and expertise they will be able to grow that business.”

Why does NZ Rugby even need a partner? Why can’t they do this themselves?

They lack the expertise, and the connections, particularly on the global stage. South Africa Rugby chief executive Jurie Roux famously said private equity investment would essentially show that rugby had not being doing its job well enough and while that description is perhaps too harsh, McKinnon said having a private equity partner would make sure NZ Rugby had a heavy hitter on its team.

“The thing that private equity brings is not just the capital, it is the capability,” McKinnon says. “And that is what NZ Rugby will want around the table. That is why they have been careful around who they are selecting. What they bring to the table is an international capability of doing things with businesses that are growing. If you imagine a sponsorship deal … the sponsors are on one side of the table and NZ Rugby sits on the other. In the future, NZ Rugby is going to have Silver Lake or whoever the same side of the table as NZ Rugby. That is really important.”

Would a private equity investor get a place on the NZ Rugby board?

Not necessarily. “You have got to recall that the intention is to set up a separate entity,” McKinnon says. Private equity firms do sometimes get board representation on other companies “but that is not what is contemplated here”.

Source: Stuff