The Hundred: Hit For Six?

The ECB, which is the national governing body of cricket in England and Wales, has launched its plan (the “Proposal”) to sell its stakes in The Hundred’s eight franchises. The Proposal is subject to approval by the eighteen first class counties, fifteen of whom are still member-owned. Crucially, the Proposal does not extend to a change of ownership of The Hundred format itself: this would be retained by the ECB.

The Hundred is a relatively new format established in 2021: a 100-ball cricket tournament involving eight teams, consisting of both men’s and women’s teams. It is a shorter and – supposedly – easier to understand format of the game. The Hundred has helped to reignite public interest in the sport, particularly among female and new, young spectators. Last year, the ECB noted that 41% of ticket buyers for The Hundred were families, 30% were women and 23% were juniors, with the percentage of women and juniors both higher than in 2022.

Broadly, the reported Proposal is as follows:

1. the ECB will sell to private investors a 49% stake in each of the eight teams (“ECB Sale”); and
2. the remaining 51% will be given to the eight hosts of The Hundred teams (“ECB Gift”).

ECB Sale

The eighteen first class counties, which the ECB governs, have until 10 May 2024 to accept the Proposal. If approval is granted, it is reported that the ECB intends to go to the market in September of this year. How doable this timeframe is remains to be seen. However, it is understood that the ECB has engaged a high-profile merchant bank to advise on the Proposal and its implementation.

The eight franchises of The Hundred, consisting of London Spirit, Oval Invincibles, Southern Brave, Welsh Fire, Trent Rockets, Birmingham Phoenix, Manchester Originals and Northern Superchargers, will likely need to be valued before the commencement of the ECB sale.

Reportedly, the host counties (the “Host Counties”) of the eight franchises of The Hundred will receive 80% of the broadcast ticket and sponsorship revenue. The next broadcast deal for The Hundred, which expires in 2028, is suggested to be worth around £90m. However, it remains to be seen whether this will be renewed and, if it is, whether this figure is correct. It is also unclear how investors may value The Hundred or any of the franchises individually. The Telegraph has reported that Deloitte previously valued the competition at £1bn in 2023, but another report produced in 2023 by Fanos Hira, a chartered accountant and former chair of Worcestershire County Cricket Club, showed that the competition generated only 41.8% of the income predicted in the first year and ended with losses of £9m in its first two years. Whatever the valuation to be achieved, 10% of all proceeds from the ECB Sale are intended to be invested into the recreational game.

It will be interesting to see which investors would like to participate in the ECB Sale. Where such unique opportunities arise, private equity sponsors are never too far away. Indeed, private equity is increasingly attracted to the sports industry and overseas cricket, as shown by the continued investment in the Indian Premier League, although such investment could now seemingly extend to English cricket.

It is anticipated that all eighteen first class counties and the Marylebone Cricket Club (the “MCC”), whose responsibility as owners of Lord’s Cricket Ground, the Home of Cricket, and the upholder of the Laws of the game, will receive an equal share of the ECB Sale. It is unknown whether the ECB will provide any directives as to how any distributed funds should be allocated or prioritised. Even if there is guidance, the first class counties will need to ensure they have good financial planning and management in place. This is following the investigation into Middlesex Cricket Board, which received a suspended points deduction, after it spent distributions received from the ECB on its first team, rather than on the intended purpose of the funds – player pathways and recreational cricket.

The ECB Sale would result in the separation of the regulatory and commercial aspects of The Hundred. Such separation would give rise to many questions, including whether new regulations should be applicable to the newly independent franchises. Would the ECB seek to regulate the eight franchises in a manner akin to the way the Premier League or the English Football League regulates the clubs in their divisions? Would the ECB prescribe rules for new owners and directors of the franchises? Would the ECB need to regulate any financial aspects of the franchises? Could the ECB Sale (eventually) pave the way for a cricketing-style financial fair play system?

ECB Gift

Once the Host Counties receive the ECB Gift, it is reported that they would have the option to sell all or some of their equity or keep it. This will be a key consideration for the Host Counties. If they do go to the market, it is reported that 10% of what they raise would be distributed among the first class counties and the MCC, with the Host County keeping the remainder. We query whether any Host County opting to retain its stake would be more susceptible to a takeover by private investors and, if so, would that be materially detrimental to those first class counties that are not Host Counties (especially those which do not benefit from any international fixtures, either)?

Comment

It remains to be seen whether the first class counties will vote in favour of the Proposal on 10 May 2024. Given some of the issues being faced by some of the first class counties (e.g. debt-related issues) and the chance of benefitting from a much needed cash inflow (even if only a one-off or short-term windfall in nature), we suspect that this will be backed by the first class counties.

Clearly, if the Proposal is approved, this would be a significant change for the game. The Telegraph has noted this represents “the biggest shake up of domestic cricket for generations”. Sean Jarvis, the chief executive of Leicestershire County Cricket Club, has been quoted by ESPN Cricinfo as describing this as the “Premier League moment” for cricket, which “if we get The Hundred decision right, it could catapult UK cricket internationally”.

The ECB’s acceptance of the need to give up operational control of, and to sell off, its premier franchise product after only four seasons seems to be driven by the desire, and need, to make the game more competitive globally and to realise some much-needed short-term cash for the benefit of the game at all levels. The ECB is (finally) placing its trust in private investors. This move is, arguably, also in keeping with the times: there is increasing private investment across the sports industry.

This is an exciting time for the game.

How we can help you

Memery Crystal has extensive experience across a range of sporting areas including cricket, football and rugby. Should you have any questions, please contact, Christopher Allen, Partner, Andy Hughes, Senior Associate or James Bateman, Solicitor.

Authors: Christopher Allen, Andy Hughes, James Bateman, and Jack Rudgeley.