Business / Business News

Warren Dick
5 minute read
28 Nov 2016
7:46 am

Western Province Rugby is undertaking a contrived fraud – Aerios

Warren Dick

A not so lekker ding.

Following the explosive news that Western Province Rugby Union intends to liquidate its commercial arm (WPR), the commercial partner at the centre of the storm has hit back, calling the decision nothing but a back-handed way of exiting the contracts the union has signed with them.

Aerios has held certain advertising and digital rights pertaining to WPR and Newlands Stadium for a number of years. The liquidation announced by Western Province Rugby Union President Thelo Wakefield on the 7th of November came as an absolute shock to them too, according to the company’s CEO, Costas Constantinou.

According to Constantinou, barely two weeks prior to this announcement, at a meeting on the 25th of October, the two parties had agreed on a way forward to begin resolving the ongoing contractual disputes between them, something that was conditional on WPR board approval that was to be provided on the 7th of November. “But this was the very day that Wakefield called the press conference to say that the WP Rugby had been provisionally liquidated,” says Constantinou.

“So the plot was always to go down this liquidation route. But we believe they are committing fraud because they realise that by liquidating they can get out of these contracts. We are going to oppose the liquidation, and we are going to hold the directors personally responsible. Because if they knew the union was insolvent, why were they entering into contracts with third parties that included multimillion-rand investments?” says Constantinou.

Wakefield cited “complex legal issues” with Aerios as one of the main reasons for the drastic action. Rumours began circulating that Aerios had signed some dubious contracts with WPR’s previous CEO. Constantinou says Wakefield is trying to pin blame for these contracts on a “rogue” CEO (namely Rob Wagner). “One of their directors, Dave Kagan, was instrumental in drafting the first contract we entered into with them, which was approved by the board. So the allegation that Wagner entered into these contracts unilaterally is completely baseless,” says Constantinou.

Western Province Rugby (Pty) Ltd is owned by the Western Province Rugby Union (75.1%) and Johann Rupert’s Remgro (24.9%). It is responsible for managing all of the commercial affairs of the union.

Constantinou says, “The other falsehood Wakefield and Zacks peddle is that Remgro (as a minority shareholder in WP Rugby) is complicit in all of this. I do not believe for a second Johann Rupert, and Remgro is complicit. I think they don’t fully understand what is going on here – that this is a contrived liquidation. If they did, I am certain Johann would step up and resolve this.”

In reply to questions we put to Remgro, it provided the following statement: “Remgro, as the minority shareholder of the company-in-liquidation and a long-standing supporter of WP Rugby, remains in contact with the Union on both the liquidation process and the way forward for WP Rugby.”

Moneyweb contacted WPR CEO Paul Zacks, but had not been able to get a response by the time of going to press.

Aerios initially became involved with WPR when they bought the advertising rights to Newlands Stadium in 2011. Despite a few problems, the relationship continued until WPR approached them in 2014 and asked if they could help them with connectivity in the stadium.

Research Aerios conducted showed that game attendance had been declining, and with the average age of their spectators being 41 years, the logic behind Wi-Fi and an app with access to video content would encourage youngsters to get involved in the game and attract youth to the stadium. “So we proposed a solution that included free high-density Wi-Fi, a WPR / Stormers app and video content creation,” says Constantinou.

The proposed turnkey solution described above represented an investment of millions of rands. In return, Aerios wanted digital advertising rights for the official Western Province Rugby App, and, crucially, specific digital rights to stream what was eventually agreed to as a maximum of six minutes worth of highlights from each game through the app.

Because the digital rights extended into the realm of the contracts SARU had with Supersport, Aerios approached SARU to explain the arrangement and requested them to exclude a portion of these digital rights in the new agreement Supersport was entering into with SARU and the unions that were to begin at the start of 2016. “They were briefed and wrote back to us saying that they could only consider our rights in the new broadcast agreement when it was to be concluded,” says Constantinou. “In a meeting with Jurie Roux [CEO of SARU], he says he had no choice but to give exclusivity to Supersport for all the digital rights including the rights that WPR gave us.”

As 2016 rolled around, Aerios went to Newlands to begin filming and producing content. But SARU threatened to block their feed, and this was supported by WPR. The two parties were now in dispute.

According to Constantinou, Jury Roux from SARU called a meeting in June to sort things out between WP, Aerios, Supersport and SANZAR. It also happened to be the new CEO of WP Rugby, Paul Zacks, first day on the job. “Roux asks Wakefield and Zacks if they understood what they signed when the contract with Aerios was agreed to. They say they did not, immediately throwing us under the bus. Despite not being party to the previous contract negotiations, Zacks then takes it upon himself to breach every term of the agreement with us,” says Constantinou.

Aerios had to revert to the courts to prevent WP Rugby from dealing directly with Aerios’ advertising rights and offering them to sponsors without the consent of Aerios.

Various attempts were made to remedy the situation, including setting the disputes down for arbitration. “Wakefield on the one hands justifies the liquidation due to the dire financial situation the company finds itself in, but on the other hand tells a different story to the public. He says there is money to pay players contracts and continue as if nothing has happened, but this is contrived.  Nothing stays the same when you voluntarily liquidate. They are willing to drag the brand through the mud; there is no good outcome from this.”

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