OPINION:
New Zealand Rugby have asked for and earned the nation's trust in their attempts to date to find a long-term solution to fix what is a universally agreed broken financial model.
That trust is built on the organisation's track record of strong financial management, the undeniable success of New Zealand's various national teams, and the unquestionable desire of everyone employed or empowered by the national body to operate in the best interests of the whole game.
It's also been built on the way they have conducted the process to determine how they should raise the much-needed capital to put rugby in this country on a stable commercial base.
The board engaged the services of globally renowned investment bank Jefferies to help them explore the various capital raising mechanisms that could potentially have been feasible and then to conduct a tender process and evaluate which bid best suited NZR's financial goals and needs.
At the end of what was a long, robust and exhaustive process, a proposal to work with US fund management group Silver Lake was deemed the only one to meet all of NZR's needs.
In an editorial published by Stuff last week, NZR chief executive Mark Robinson stated: "What is the best thing we can do for all of rugby? Our answer – for New Zealand Rugby to create a new commercial entity – in partnership with Silver Lake.
"There were other options of course – to secure our future and grow our game – and we took time and care to explore these. We considered and then rejected several – a public listing on the NZX, debt funding, and a capital raise in New Zealand. All were robustly assessed against our key objectives."
But in the wake of Forsyth Barr, a respected investment bank and brokerage firm, tabling a comprehensive proposal – one which they are willing to underwrite such is their confidence – to raise between $170m and $190m through an IPO, it provides significant basis to check in with NZR to be sure that this trust is not misplaced.
NZR say they rigorously assessed the viability of an IPO offering a small stake in the new entity that will be created to house the commercial rights, yet when Forsyth Barr managing director Neil Paviour-Smith was asked on Friday whether he or his firm had ever been contacted by the national body to discuss such a proposition, his one word, definitive answer, was: "No".
New Zealand has a few other investment firms capable of determining the viability of floating businesses on the stock market, and while Paviour-Smith says he has no knowledge of whether NZR contacted any of his competitors, he does say, that if they did: "I would be surprised if any other firm would offer an opinion that was significantly different to ours".
The Herald has asked previously why NZR dismissed an IPO as an unworkable option and was told that they were told they would never obtain a valuation anywhere near the $3.1bn offered by Silver Lake. The Forsyth Barr offer places a value of between $3.4bn and $3.8bn on NZR.
NZR has also said that another reason to reject an IPO was that the NZX rules require a minimum of 25 per cent of the company to be listed.
This is true, but the Forsyth Barr proposal has a simple and legal workaround which is to create a third entity, 100 per cent of which will be listed on the exchange.
This third entity will hold the five per cent share in the second entity, known as CommercialCo – which will house all the revenue generated by NZR.
This administrative solution is not considered wildly inventive or radical. It is relatively common in the investment world and likely to have been suggested by any financial house.
NZR has also cited the need for excessive transparency around commercial transactions as a reason not to list.
The suggestion has been made by NZR that a sponsor such as Adidas would no longer commit to the All Blacks if the value of their investment had to be made public to comply with NZX rules.
However, other major sports brands such as Manchester United are listed on the stock exchange in the UK and continue to win enormous sponsorship deals.
Also, it is not clear what specific level of transactional disclosure would be required given all the relevant deals will be conducted through CommercialCo and NZR already lists, in its annual report, the total value of revenue it separately receives from sponsorship, broadcast, and gate receipts.
The social media world has also cited a potential conflict of interest held by David Kirk who is president of the NZRPA and chair of Forsyth Barr– presumably as a means to passively dismiss the validity of the proposal.
However, such conflicts are commonplace in business and not, according to the Institute of Directors, a concern per se, as long as they are declared and managed appropriately – something Paviour-Smith says has very much been the case in this instance.
NZR after all, has stated that one of its directors, Bart Campbell, is also a partner in a company called Left Field Live, leading to the national body's chair, Brent Impey, saying last year that this venture could "potentially" be involved with future All Blacks or NZ Māori games in overseas markets.
NZR may not like this, but the fact that it took Forsyth Barr less than two weeks to not only structure a domestic flotation proposal but also secure enough confidence to offer to underwrite it, requires deeper exploration of the due diligence process undertaken by the national body.
They can no longer demand that everyone simply take it on trust that Silver Lake is the best and only deal on offer.
The Forsyth Barr proposition has sparked significant public interest and NZR are going to need to comprehensively shoot it down as lacking foundation and credibility.
Instead, Robinson has tried to dismiss the Forsyth offer as a breach of privacy and argued that: "NZR has no desire to continue to play out an ill-informed 'my model is better than yours' debate – nor do we think the public like it."
But he may have entirely misread the situation, as debating the validity and suitability of the two financial offers is precisely what passionate fans of the game who care deeply about the All Blacks want to do.
McCaw was wily, says Barnes, but no cheat.