If the deal is consummated, billionaire James Packer’s acquisition of a sizable stake in the South Sydney Rabbitohs will change the club. The question is whether for better or worse.
As Souths confirmed Wednesday, the long-mooted bid for the 37.5% share held indirectly by expat businessman Peter Holmes a Court is from Packer’s unlisted powerhouse Consolidated Press Holdings (CPH), not Packer personally, and it is no act of charity.
The Australian Financial Review put the likely purchase price at $12.5 million, including assumption of accrued debts to Holmes a Court of almost $5 million, a deal theoretically valuing the whole club well north of $20 million.
If remotely accurate that’s a thumping price given Blackcourt, a 50:50 venture between Holmes a Court and actor Russell Crowe, bought 75% of the South Sydney District Rugby League Football Club (SSDRLFC) for $3 million in 2006. In short order the two benefactors lent the club more than $6 million on concessional terms that included an interest holiday until 2013-14, with no repayments due until October 2015 and the loans not repayable for another decade. The club has accumulated losses of almost $9 million as at the end of 2012-13.
Rabbitohs chairman Nick Pappas says if the Packer purchase proceeds and it is a straight transfer of Holmes a Court’s 50% share in Blackcourt, members will not get to vote on the deal. In the 2006 privatisation, two protections were put in place for the members, who own the remaining 25% of the SSDRLFC and the one preference share that protects the club heritage.
First, if Blackcourt wants to sell shares in the club, members would get first right of refusal — a chance to buy the shares at an independent valuation — and if the club decided not to buy them, affiliated leagues club Souths Juniors would get a chance, too.
A second protection allowed the members a vote if there was a change of control of Blackcourt, defined as a) both Crowe and Holmes a Court selling out, or b) a sale of more than 50% of the shares.
If CPH buys just the half of Blackcourt owned by Holmes a Court, there will be no change of control as defined in the privatisation deed. The CPH deal would increase pressure on Crowe to stay, however. If he were to sell just a single share to CPH, lifting its stake above 50%, the deal would go straight to an extraordinary general meeting of members. Pappas told Crikey every indication from Crowe was that “he’s there for the long haul”.
It would be unfair to say Packer is jumping on the bandwagon now the Rabbitohs have finally won another grand final. This deal has been a year in the making, with on-and-off negotiations between Packer and Holmes a Court.
Souths is back in the black, with after-tax earnings of $1.5 million this financial year, but unlike the most profitable clubs it does not enjoy a stream of income from a licensed leagues club. Souths Juniors, which has a stack of pokies and a seat on the SSDRLFC board, runs the juniors competition, which provides a lot of the team’s best players.
“Pappas says the club will ‘not be partial to any organisation’ and Crown will have to compete with all comers for sponsorship on a commercial basis.”
Pappas says this aspect of the club’s strategy, in place since the privatisation, would not change and was indeed the way the NRL wanted all clubs to go — towards more corporate sponsorship and ticketed membership on the AFL model. Rumours the CPH investment in the Rabbitohs would mean a new Packer-backed leagues club (complete with pokies) are “utter nonsense,” says Pappas. “It won’t happen”.
A CPH spokesperson concurred: “CPH and Crown have no interest what so ever in establishing a football or leagues club, we can totally rule that out.”
Packer’s No 1 motivation is to work with Crowe, and the pair are said to be thinking big picture, leveraging the brand and boosting membership from 33,000-plus to rival the 80,000-strong membership of AFL giant Collingwood. Pappas says the reaction to the premiership win in cities like Perth and Cairns, where the Bunnies played exhibition matches this year, has been “extraordinary”.
CPH will get two nominees on the board of SSDRLFC and will want a return on its investment. CPH owns 22% of ASX-listed Crown Resorts, the largest share of the 50.01% controlling stake held by Packer’s interests. According to the most recent accounts, CPH made after-tax profit of $181 million in 2012-13, and although it is not broken out, its $60 million dividend from Crown would represent about a third of that.
There are synergies between Crown Sydney and a CPH stake in the Rabbitohs, but these are related to the $1 million-a-year shirt sponsorship and indigenous employment programs in Redfern through Souths Cares. Otherwise, a spokesperson for CPH said “there will be zero commercial benefit for Crown”.
Regardless of any CPH investment, Pappas says the club will “not be partial to any organisation” and Crown will have to compete with all comers for sponsorship on a commercial basis and Packer “would expect that,” adding “we’re hot property now”.
Club legends like John Saddler and George Piggins were lining up this week to welcome the Packer investment, pointing to the late Kerry’s support for the club back in the day.
But former Rabbitohs captain and Footy Show larrikin Mario Fenech said it himself, telling The Sydney Morning Herald: “It is great to see James carry the flag … but now it is up to us to promote what James wants — us promoting his businesses.”
Pappas is determined to protect the club’s working-class ethos. “We’re not going to forsake that heritage for anything.” The key? “Don’t abandon your community roots and don’t abandon your community ties. Do not abandon Redfern. Do not abandon Maroubra. While I’m around, nothing’s going to change.”
As Pappas told the crowd yesterday at Sydney’s town hall, where Souths were given the keys to the city, the aim is “a new golden era”. Pappas wants the club to be around in another hundred years: “It needs to align itself with business, in order to survive.”