- CA could allow investors to take stake in new commercial vehicle
- Organisation exploring new financial options after modest increase on broadcast contract
US investment bank Morgan Stanley is involved in discussions with Cricket Australia (CA) about a privatisation model for the national governing body, according to The Sydney Morning Herald (SMH).
The firm is reportedly acting as a consultant as CA mulls a major overhaul of the domestic game’s finances, joining a working group featuring representatives from states, territories and the Australian Cricketers Association (ACA).
Incumbent CA chair Lachlan Henderson and his successor Mike Baird, Cricket New South Wales chair John Knox, ACA chief executive Todd Greenberg and Cricket Australian Capital Territory (ACT) chair Greg Boorer are all believed to be part of the group.
According to The SMH, the most likely privatisation path for CA would be the formation of a separate entity created to house its revenue-raising activities such as broadcast, sponsorships and digital deals.
A percentage stake of the new company would be sold to private investors to give them a chunk of the income in return for a capital injection potentially worth hundreds of millions.
The move falls in line with CA’s five-year blueprint, unveiled last August, which includes the goal to ‘diversify revenue streams with increased innovation’.
CA was linked with private equity investment back in November 2021, having reportedly held preliminary talks with Silver Lake earlier in the year. However, CA’s recently announced new domestic broadcast rights partnership with Foxtel and Seven has reportedly opened the door for privatisation.
CA’s seven-year extension is worth AUS$1.512 billion (US$1.017 billion), up from its current AUS$1.182 billion (US$795 million) deal, but the relatively modest increase means external investment is more inevitable.
The SMH adds that leading contenders for a stake in CA’s commercial operations would likely arrive from the US, meaning the likes of CVC Capital Partners and Silver Lake could come into play. RedBird Capital Partners, which acquired a 15 per cent stake in the Indian Premier League’s (IPL) Rajasthan Royals in June 2021, is another possibility.
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This privatisation speculation arrives just days after CA confirmed its new domestic broadcast pact, which chief executive Nick Hockley described as “an important outcome for all of Australian cricket”. Still, the deal is not the mammoth increase the governing body was likely hoping for.
It means private equity investors could benefit from the broadcast deal, which The SMH states is set to provide the smallest rights value uplift for Australian cricket in more than 30 years. The newspaper adds that the annual fees of around AUS$200 million (US$135 million) would fail to keep pace with inflation relative to the AUS$197 million (US$133 million) per year agreed in 2018.
Raising private capital would probably face opposition from within the domestic game, but CA may feel it has little option if it is to achieve the financial goals set out in its strategic plan. The organisation does not have far to look on the institutional investment front. Last year, New Zealand Rugby (NZR) and Silver Lake struck a NZ$200 million (US$124 million) deal for the firm to take a stake in the national rugby union body’s newly formed commercial vehicle.
The prolonged negotiations for that arrangement, as well as concerns from fans and players, perhaps offers a warning to CA as it bids to marry tradition and financial sustainability.
Source: news.google.com
