Big Bash privatisation: Inside how Melbourne Renegades will be sold

While there has been strong debate around privatising the BBL over recent months, which included calls from the Australian Cricketers' Association (ACA), New South Wales, Queensland and South Australia, for the process not to proceed until four key requirements were met, CA, CV and Raine Group have prepared an extensive due diligence document for prospective buyers.

CV chief executive Nick Cummins travelled to the UK recently to speak with representatives from Raine Group and meet with administrators, executives and owners from the Hundred franchises and the ECB to better understand the sales process they undertook last year, including trying to learn lessons from any mistakes that were made.

Prospective buyers will be invited to submit a formal expression of interest (EOI) to Raine Group. That EOI will allow prospective buyers to gain access to the due diligence document and to engage in dialogue with Raine Group over any questions.

"It's not open to everyone," Cummins told Cricinfo. "It's for known high net worth individuals or investors. For the next four weeks or so that process will run through."

It is understood there are 20 to 30 interested parties who could engage in the process initially. Upwards of six IPL owners could be involved including those with franchises in the Hundred and elsewhere. Not all of them will bid on Renegades. Some will be invited to participate in the initial phase to get a sense of the detail of the BBL investment opportunities on offer with an eye to potentially bidding on other clubs.

Sanjay Govil, owner of Washington Freedom in MLC and co-owner of Welsh Fire, may be one of those individuals having already expressed a strong interest in investing in Hobart Hurricanes. GMR group, part owners of Delhi Capitals, is another who Cricket Tasmania CEO Dominic Baker mentioned in a press conference last week.

It is understood that certain IPL owners are only interested in purchasing a BBL club at 100% with possible home games at the MCG a huge drawcard. Only one Hundred franchise was sold at 100% with Sun Group, the media conglomerate who own Sunrisers Hyderabad, purchasing Northern Superchargers from Yorkshire and renaming them Sunrisers Leeds.

After the four-week EOI period, likely to finish in mid-to-late October, those interested in moving to the next phase will be invited to submit an indicative first bid. "From that point, we'll assess the bids, the suitability of the bidders, and choose to take forward a small number of final buyers," Cummins said.

That number is likely to be under five and could be as few as two. Those bidders will be invited to Melbourne for further discussions and due diligence including conversations about training and administration facilities among other things. Thereafter the final bidding process will take place. What shape that will take remains to be seen but an online auction or a one-off, single bid, silent auction are among the possible options. It won't necessarily be the highest bid that wins, with a best-fit criteria coming into play.

"We're confident that by around the start of the BBL, we'll know who the buyer is," Cummins said. "The deal may not be convened by then but at least we'll know who the likely owner is."

Clearly defining what is being sold is critical in the EOI phase. One of the lessons Raine Group learned from the Hundred was not detailing the terms of sale before agreeing to a price. Those terms were discussed retroactively, and it created some complexities in the Hundred process.

CA and CV are keen to clearly outline what is up for sale and what rights new owners or investors might have. For example, earlier this month, CA chief executive Todd Greenberg and chair Mike Baird insisted CA would retain control of the schedule.

"I think there's a misconception that the Big Bash is for sale and that the Big Bash is being sold," Cummins said. "What's being sold is a team participation agreement (TPA). That is an agreement between Cricket Australia and Cricket Victoria to have a team that participates in the Big Bash. We are proposing to sell 100% of the Renegades' team participation agreement and 49% of the team participation agreement with the Stars, although we would maintain control of the Stars."

Currently all eight TPAs in the Big Bash Leagues are owned by CA on 30-year leases to each of the states (Victoria and NSW each have two) with those leases having 15 years to run from the start of the coming season. Having a club come under a state's ownership and fully onto their balance sheet has been a large part of the appeal for the three who are for privatisation in Victoria, Tasmania, and Western Australia.

"Thinking about the Hundred, I think there are two main lessons, one that Cricket Australia have derived and one for me," Cummins said. "From Cricket Australia's perspective, it's making sure that upfront all the rules of engagement are agreed to before you go to sale. So an investor coming into the Big Bash understands what their decision-making rights are as it relates to fixturing, TV rights, share of commercial revenue - that those rules are all in place so they know what they're buying rather than trying to negotiate that after the sale price has been agreed.

"From my perspective, talking to the teams that have gone through the process, it's probably twofold. One is being really clear in your mind what the profile of the ideal investor is as it relates to the Stars because they're going to be our partner going forward. But even with the Renegades, what kind of people would you like running a team in Victoria? The second part is the importance of having people on the ground. So even with Renegades, who we wouldn't have an active management role with going forward, is impressing upon them the importance of having a Melbourne-based team [of administrators] who can continue to build that community connection throughout the year."

There may also be opportunities with the Victorian government for the investor to build high performance academies or facilities in Melbourne separate from CV's training facility at the Junction Oval, something that Rajasthan Royals have already done in Bundoora about 35 minutes north of Melbourne's CBD.

There will also be rules for the investor after the purchase. Teams will not be allowed to be on-sold within the first five years. If prospective investors want to sell beyond that period, the selling state and CA will have first rights to repurchase, albeit doing so at a level or higher price would defeat the purpose in the first place. CA will also have final veto rights on any future sales in the event of serious concerns around the investor involved.

The price, the final call and the ACA

The asking price has been carefully guarded. But Hundred sales are certainly a guide and CV, who will make the final call, won't sell if they don't get a minimum figure they are comfortable with. However, there is confidence they will get a price that will make the deal worthwhile.

The only 100% sale in the Hundred yielded AU$187.5 million for a club in Leeds that plays at Headingley. There is a thought that a BBL club in Melbourne, playing at the MCG, could hold equivalent global value. Those involved in the process are wary that the AU$272.8 million a US tech consortium paid for 49% of London Spirit, who play at Lord's, is not a realistic reference point given it came on the back of bidding war.

CV are comfortable with the division of the sales proceeds even if some other states have not been.

The ACA are still adamant that they have a right to 27.5% of whatever sale price comes in under the existing the players' pay deal but CA are equally convinced the sale of an intangible asset such as a TPA does not get classified as revenue. The two sides are set to go to arbitration while the Renegades sales process goes on.

"We believe we've gone through all the due diligence," Cummins said. "While there are some things that need to be ironed out around the MoU or with other states about whether they are going to sell, we're very, very comfortable, and have been for some time, about our views around the Renegades.

"We're not selling at any price. We've got a very clear financial ambition about what we want to achieve and if we don't achieve that, we're happy to retain ownership of the Renegades. But we're conscious this is a project that's been embarked upon to help Cricket Australia repair its balance sheet and put more investment back into Australian cricket and we want to help with that."