Consistent with their transparency on a proposed equity deal to purchase a controlling share in Western Province Rugby, Red Disa Investments has been responsive to feedback on the proposal which was set to go to a club vote in Cape Town on Wednesday.

Red Disa answered questions in an open letter sent to the clubs.

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RE: CONCESSIONS & CLARIFICATIONS REGARDING THE RED DISA CONSORTIUM OFFER

A summary of the Red Disa Consortium’s offer to invest in WPPR was distributed to the various clubs last week. Since then we have been approached by a number of stakeholders who have indicated their support for our investment and provided encouragement for the future. We are grateful for  these conversations which have provided additional insights into the decision to be made by the General Council.

Following the general council meeting last week we also received feedback from the Administrator of WPRFU on points raised by council members.  We have listened and, should the proposed transaction be approved, we will incorporate the following practical amendments in implementing the deal:

1) Ticket Allocations
WPPR is loss making and cannot afford to give away thousands of tickets (that could otherwise be sold), however as part of our commitment to the Western Province rugby community we will:

• guarantee 1,000 complimentary tickets to be provided to WPRFU for all Stormers and WP games under the control of WPPR for use by clubs, sub-committees, schools and referees.
• guarantee 200 complimentary tickets to be provided to WPRFU for all test matches under the control of WPPR hosted at Cape Town Stadium for use by clubs, sub-committees, schools and referees.

To the extent there are additional unsold tickets, more could be made available.

2) SARU distributions
The SARU distribution retained by WPRFU will be increased from ±R5.6m to ±R6.4m to accommodate WPRFU’s current financial situation. This amount will be fixed for the next 3 years, after which it will be adjusted annually for inflation.

3) Intellectual Property (“IP”)
In the event that a competent court grants an involuntary liquidation order against WPPR, WPRFU will be granted a right of first refusal over the WP & Stormers intellectual property.

We think it is important to also provide some further insight, context and clarity on how our offer deals with the intellectual property and the controlled bank account for the purposes of receiving SARU distributions.

Intellectual Property
The terms of our offer requires WPRFU to transfer the WP and Stormers trademarks and other intellectual property (“IP”) to WPPR. Concerns have been raised around WPRFU having to pay for the use of these trademarks in the future.

Under the terms of our proposal, WPRFU will retain the right to non-commercial use of the intellectual property for use in community rugby. WPRFU and WPPR will enter into a perpetual licence agreement for the use by WPRFU of the IP against payment of a nominal amount of R150 per annum. In short, WPRFU will not be deprived of its use of Western Province IP for use in community rugby.

We understand and celebrate the emotional connection that the clubs have with the IP, and we commit to being respectful and responsible custodians of the Western Province and Stormers IP. Additionally, we note the following regarding the intellectual property:

• The IP is central to the value of WPPR, as the company has no physical assets and the valuation and other deal terms are based on the inclusion of the IP.
• All of Red Disa’s engagement with WPPR have been premised on the fact that the IP would be owned by WPPR at the time of the transaction.
• The IP was in the hands of the previous professional company, before it was liquidated.
• We consider the IP ownership framework set out in our proposal to be normal for a transaction of this nature, and it would be a requirement of any potential equity partner.

 

SARU Distributions

• There is no intention to control WPFRU’s finances, but WPPR does need to ensure that it can control its own finances.
• WPPR bears the cost of competing in various tournaments e.g. URC and Currie Cup, while the broadcasting revenue for these tournaments is paid to SARU.
• The SARU constitution requires that all distributions are paid only to its members, so the funds earmarked for amateur and professional rugby is combined into one amount which is paid to WPRFU.
• This was uncontentious while WPRFU owned 100% of WPPR, but under a scenario where WPRFU only owns 26% of WPPR an alternative mechanism is needed.
• We propose that SARU pay the combined distribution into a separate (non-operational) WPRFU bank account (to comply with the SARU constitution) under the control of WPPR, from where the amateur rugby portion will be paid to the operational WPRFU bank account, and the professional rugby portion will be paid to WPPR bank account without delay.
• The larger part of the SARU distribution vests in WPPR, so it is not improper for the company to control the bank account that receives the distribution. This is not dissimilar to how it is treated by the other URC franchises.

 

Conclusion
It is of critical importance that the preparation of the team for the upcoming season is not affected by this transaction, and that WPPR gains clarity on its own way forward, so we trust that the club members share our positive view on this transaction and that together with the loyal supporters we can continue to build out the legacy of this proud rugby franchise.

We trust that the additional week has enabled all interested parties to ventilate any concerns and to obtain the information they require in order to bring out an informed and considered vote on the transaction tomorrow.

Also, we believe that the amendments we have offered address the concerns raised with us, and we look forward to a positive outcome at the vote on Wednesday evening.

Photo: Cole Cruickshank/Gallo Images