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North Sails 2021 Innovation - LEADERBOARD

America's Cup: Auckland defence dead in the water after feisty Squadron meeting?

by Richard Gladwell/Sail-World.com 9 Dec 2021 02:12 PST 9 December 2021
The America's Cup on display in the Royal New Zealand Yacht Squadron, flanked by the two Challenger trophies won by Emirates Team New Zealand in the 2013 and 2017 America's Cup regattas © Richard Gladwell / Sail-World.com

The Royal New Zealand Yacht Squadron's deferred Annual General Meeting broke up Thursday evening with requests being refused for the team to engage with the backers of the Kiwi Home Defence group to find a way for the 37th America's Cup to sailed in New Zealand.

Citing a tight sponsorship market and other issues, Emirates Team New Zealand CEO Grant Dalton refused point-blank to meet with the would-be backers of the self-styled Kiwi Home Defence group. They have been firing media salvoes at the team, and Dalton, in particular, for several months.

"At a Board level, we have resolved not to have anything more to do with these people," Emirates Team New Zealand CEO Grant Dalton told Sail-World. "This is not about me - it's at Board level," he said. "They can push and prod, but it's not going anywhere."

Adding to points raised in the Meeting, Dalton explained that two significant effects were impacting the sponsorship market for the 37th America's Cup, which wasn't present in the previous edition - where the sponsorship contracts were largely negotiated before the emergence of the COVID pandemic.

"The first is that you can't really travel", he said. It is very difficult with the New Zealand Government quarantine regulations for key team members to travel internationally and meet potential sponsors face to face.

"The bigger issue is the pandemic related clauses, including "Diminished Returns", that a sponsor now wants to be inserted into their contracts. Suppose you are a normal sport that runs, say, 27 games a year, with gate takings, and you miss a game or two because of cancellation for pandemic reasons. In that case, they can keep going through their gate takings, but they still have to repay a percentage of the sponsorship back to the sponsor because they are not getting full expected value."

"In our case, we are not going to have an event for several years, and we need the payments along the way. We can't spend a cent, because we might have to give it all back at the end. It's almost a total chicken and egg situation and near impossible to negotiate major sponsorships."

So far, no new sponsorships have been negotiated, and Dalton says their first loyalty is to their long-time sponsors Emirates, Toyota and Omega before they look further afield. "That will never change in my time as CEO," he said.

"It's more difficult now because of the pandemic type clauses, but our first task is to get the Venue away, and get the primary money created from Venue [Hosting Fee], and then start the next process because the sponsors want to know where it is going to be."

Dalton says that sponsors have seen past the New Zealand media controversy over taking the Cup offshore. "It's effectively an argument at club level and doesn't get much attention, mainly because they see it as a misguided attempt at what is effectively a team takeover." During the course of the meeting Emirates Team New Zealand issued a media release which explained several of the points Dalton made in his presentation.

The only potential white knight for a New Zealand defence to occur would be an intervention by the New Zealand Government, who the previous day announced a $5.4million four-year backing of the NZ SailGP regatta starting in 2023. At the SailGP NZ launch on Wednesday, NZ Major Events officials said they saw the hosting of major sports events as a key to New Zealand's post-pandemic economic recovery. However, that thinking doesn't extend to the 37th America's Cup. On top of the $5.4million from Major Events, it was revealed in response to Questions in the NZ Parliament, yesterday that there will be additional co-funding by the regional agencies Christchurch NZ, and Auckland Unlimited.

It is not known how much Major Events and Auckland Unlimited will be saving through the now cancelled stopover for The Ocean Race, scheduled for February 2023 in Auckland.

Dalton says the Government discussions stopped after their exclusive good faith negotiation period ran out three months after the conclusion of the 36th America' Cup on June 17th 2021.

"There's no reason for those to be ongoing, as they have said, quite correctly, that they are not going to increase the offer. We have no intention of asking the Government to increase their offer, based on the situation we find ourselves as New Zealanders."

Dalton confirmed that the team and America's Cup Event Ltd were "on the hook" for the whole NZD$200million required to fund the team and event.

Because the organization of all events is now with ACE, instead of being split between ACE (for the Match) and the Challenger of Record as happened for AC36, Dalton believes the whole event will be a lot simpler and easier to run, with more easily defined expectations for sponsors of teams and events. "It's difficult when you have a strongly funded Challenger of Record because they try and swamp you," he explained. "If we weren't going 3kts faster - it might have been a whole bunch different!"

Dalton says the relationship with Challenger of Record backer, UK owned petrochemicals multinational INEOS is very good. "I got a text from Jim Ratcliffe as I sat down at the meeting tonight," he said. "They are not involved in the venue selection, as per the Protocol. I brief them regularly, but they have to watch and wait."

He says INEOS will not step in and fund the event in any way.

He told Sail-World that Prada, sponsor of the Challenger Selection Series and America's Cup for AC36, had exercised their right of renewal for AC37. "We put that in the contract to try and create some continuity between the events, as was done in Valencia, San Francisco and Bermuda (and previously with Louis Vuitton's longstanding association with the America's Cup Challenger Selection Series.

"Prada are involved as the event naming sponsor for AC37 - they have asked to be able to exercise their right of renewal", Dalton said. He expected the Italian fashion house would be making a similar level of financial contribution as the previous America's Cup.

[Under NZ commercial law "exercising a right of renewal" is just a statement from the incumbent party that they wish to negotiate an extension, usually with changes, to their previous/current agreement. Depending on the wording of the existing contract, for commercial reasons, there will often be an exclusive right of first negotiation. The NZ Government had a similar clause in their Host Venue contract for AC36 for re-hosting AC37. That option was exercised after the conclusion of AC36, the parties failed to reach agreement by the prescribed date - June 17 - and Emirates Team NZ were free to continue with the host venue negotiation process that had been a request for information exercise prior to racing the 36th Match.]

Despite the strained relationship that existed between the Challenger and Defender in the last Cup, Dalton sees the Prada involvement in a not so all-encompassing role in AC37 as being very positive. "Prada is involved as an event sponsor only now," he says. "They are not like they were last time as Challenger of Record [representing all Challengers], a challenging team, and a sponsor and running the media centre."

"ACE now has the marketing umbrella over everything," he added.

After the meeting, Royal New Zealand Yacht Squadron Commodore, Aaron Young, explained that the Annual General Meeting was a very significant event for the club, celebrating its 150th year.

"The first half of the meeting went through quickly. Then we moved onto the America's Cup."

"Grant shared some clarification around the numbers, which I think a lot of people didn't understand and didn't appreciate what was truly involved."

"There was no motion and no vote. Because of the withdrawn SGM request, we wanted to talk to the Members, so we allowed them to speak under General Business, and there can be no motion introduced [under General Business] ."

It remains to be seen if the AGM rules a line under the activities of the Kiwi Home Defence group.

"I asked Mark Dunphy the first time I met him, what his motive was, and I asked again tonight. And I still don't know," Young said.

"Ultimately, we are here for Corinthian and club sailing. Yesterday we had our first and last Wednesday evening race for the year.

"We have to remember that we are a yacht club. And as a yacht club, we are not involved in the detail of the America's Cup. We are the Trustee and custodian, but that doesn't mean we make decisions for the team or around the event detail," he explained.

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