Dead Rebels: Why Rugby Australia killed Melbourne’s Super Rugby team

Walking into Collins Street’s Intercontinental Hotel, Rugby Australia chief executive Phil Waugh and chairman Dan Herbert had just come from delivering bad news. Etched on their sullen faces was the weight of killing a rugby club.

The rugby bosses, wearing Wallabies ties and sitting in front of a Rugby Australia-logo laden scrim, had informed players and staff at the Melbourne Rebels of the news just hours before they flew out to Fiji for the Super Rugby finals.

Businessman Leigh Clifford (right) wants to save the Melbourne Rebels, and Rugby Australia CEO Phil Waugh, who announced the club’s shutdown on Thursday.Credit: Artwork: Bethany Rae. Photos: Getty Images, Eddie Jim

The decision upset state government officials who were now questioning their interest in bidding for the Rugby World Cup final, dismayed the small but passionate troupe of rugby fans in the state, and infuriated the backers of the proposal.

It was far from the outcome that had been assured by then-Rebels CEO Baden Stephenson only five months earlier, when he wrote to Rebels members to quell fears about the club’s financial position amid the collapse of Paul Docherty’s business empire.

Stephenson wrote: “The Melbourne Rebels wishes to address the speculations and set the record straight. Despite the unfounded speculation circulating in the media … the Melbourne Rebels’ future is extremely bright.”

On Thursday, that bright future was snuffed out.

The killing of the Rebels is now the subject of much conjecture. Rugby Australia officials are adamant it was a pragmatic business decision based on the Rebels’ parlous financial position and underdeveloped rescue deal; supporters of the Rebels say it was an unfair call and a “premeditated murder” of the club that had operated for 14 seasons.

THE UNFOLDING

The Rebels formally entered voluntary administration on January 30, appointing administrators from auditing giant PwC, who would go on to uncover a $23 million debt, with just $17,300 in the bank and a handful of assets.

Rugby Australia assumed all payments for the players’ wages and funded the club for the 2024 season, and took back the club’s Super Rugby licence. It seemed then, among some rugby insiders, the peak body – itself facing financial woes – had little interest in saving the club, and would push for the Rebels to enter liquidation.

The Rebels had other plans. They developed a legal case against Rugby Australia, won a court bid to give them time to put forward a rescue deal, then convinced creditors to vote for that deal over entering liquidation.

Business magnate Leigh Clifford was brought in to lead a private-equity consortium that promised to pump $30 million into the club and keep it surviving beyond 2025. Already, the consortium was claiming to be on the way to raising that sum.

Last Wednesday, that consortium invited Rugby Australia into an online data room to view a cache of documents outlining its plan to rescue the club.

The data room included a two-phase approach to the release of information. The first phase included detailed financial modelling, plans for its high-performance participation agreement, a strategy to grow the game and the club’s commercial viability and, critically, governance and risk requests including top-line details of the consortium’s shareholders and proposed board members.

It wasn’t enough detail to quell Rugby Australia’s concerns. The financial modelling also raised eyebrows with KordaMentha basing its figures – which showed revenue nearly quadrupling from $2 million to $9.8 million – on the expectation that Wyndham would soon have a greater population than Canberra.

The Melbourne Rebels will play their last game this month.Credit: Getty Images

The modelling also showed the new consortium would be a loss-making operation until 2030, when it would eke out its first profit.

Herbert was scathing of the consortium’s rescue plan on Thursday, describing it as “embryonic” and “very underdeveloped”.

“We felt that there still was a huge amount of risk, and the numbers presented in that financial modelling were very risky, and that risk … falls back to Rugby Australia if they fall short,” he said.

A senior sports administrator not involved in rugby, but speaking anonymously due to commercial sensitivities, said there were gaps in the consortium’s plan that were exacerbated by the sport’s financial position.

Rugby Australia’s key issues with the Rebels consortium rescue deal

• A reliance on extra funding from the governing body “to cover forecast operating losses” and “overly optimistic” financial projections.
• Identities of consortium members were not disclosed.
• That key advisers included at least one current or former director of the Rebels – “meaning that an individual or individuals involved were responsible for the [club] governance during the period in which the administrator considers the company may have traded while insolvent”.
• Verbal assurance but no documentation to support the claim that the consortium has committed $18 million in funding.
• No official agreement with Western Melbourne Group regarding co-location at Tarneit.

“[The Rebels have] never made money. With their proposal, it looks like they would be on the perpetual tap of Rugby Australia. There was a plan to take costs out – but not to grow fan engagements to get bums on seats, nor get significant TV audiences,” they said.

“It’s a problem of Super Rugby’s making, not just the Rebels. It’s a competition that’s lost its way very significantly.”

The administrator acknowledged the argument made by the Rebels’ side, which accused the sport of bias for taking on the NSW Waratahs’ debts in 2023: “They don’t have the money to support underfunding teams. The Waratahs are their most important market. The trouble is it has not been embraced in Melbourne.”

Despite doubts about the viability of a Melbourne team, the consortium pushed on – but the relationship between the parties was still beset with distrust.

After Rugby Australia accessed the consortium data room, it appears that while one side thought it had been forthcoming, providing enough information to make a decision, Rugby Australia had a wildly different view.

On Monday, Rugby Australia held a regular board meeting. Several people in the Rebels camp believe it was at this meeting the call was made to kill the club. This was flatly rejected by those in the Rugby Australia camp, who said they had been underwhelmed by the documents they’d seen, but had not made any final decision.

On Tuesday, the formidable father-daughter team of Clifford and former Rebels director and accomplished lawyer Georgia Widdup met Rugby Australia to discuss phase two of the plan, which included information on identity of the consortium members, sponsors, broadcast capabilities and the Victorian government support.

It appears a key stumbling block was the request of the consortium that Rugby Australia give an indication it would support the plan and sign non-disclosure agreements before learning of the consortium members and other key details.

That meeting, which ran from 7pm to 9pm, became heated with both Clifford and Widdup feeling they had been rough-handled by Rugby Australia representatives.

Widdup wrote to Rugby Australia chair Herbert, accusing a board director of breaching their code of conduct during a late-night meeting.

“The efforts are genuine and did not deserve to be dismissed in the manner that they were and with the contempt that was shown to all of us,” she wrote.

Herbert promptly wrote back: “From my understanding, whilst our representative may have posed some tough or uncomfortable questions, they were put in a firm but respectful way.”

He added that questions about whether Widdup, who is part of the seven directors leading legal action against Rugby Australia, had a personal conflict in being involved with the rescue deal might have caused discomfort, but were important to be asked.

The animus simmering between the two parties palpable, the emergency meeting for the Rebels was called for Thursday morning.

Killed to be kind?

A close associate of the Rebels who was aware of the negotiations described it as a plan of “premeditated murder” of the club.

Supporters of the Rebels point to how the sporting body choked Super Rugby clubs of funds after the COVID-19 pandemic, refusing to turn back on the funding tap after lockdowns cruelled the league’s performance.

The Melbourne Rebels at their Super Rugby launch event in 2010.Credit: Wayne Taylor

Another sign of the Rebels’ impending doom, they claim, came in July 2023 when the club’s senior officials were made aware of discussions led by Rugby Australia that a “Rebels Pasifika” team would play the British and Irish Lions in 2025, rather than a Melbourne Rebels team.

Supporters also believe that Rugby Australia’s widely reported decision to centralise the ownership of the Super Rugby teams under its banner in August was another death knell for the club, and by then, the Rebels were dead men walking.

These claims were fervently rejected by those in the Rugby Australia camp, who said they had no interest in killing in the club, but simply were left with no other alternative. They were only made aware of the extent to the club’s losses after the Tax Office sent the peak body a garnishing notice at the end of December. By then, it was too late.

“It’s simply the fact that they got themselves into this position,” one senior rugby source said.

They also claim they were never made aware of the director penalty notices until it was reported by the Australian Financial Review – later confirmed in a report filed by administrators with the corporate regulator.

Now all that is left of the club is an impending legal battle.

“Every dollar spent on lawyers is money not spent on rugby and community games and programs,” Herbert said on Thursday.

News, results and expert analysis from the weekend of sport sent every Monday. Sign up for our Sport newsletter.