Gareth Davies has branded as “nonsense” claims the Welsh Rugby Union are asset-stripping by taking over the Newport Gwent Dragons.

The WRU chairman has urged shareholders of Newport RFC to back the move, which includes the purchase of Rodney Parade.

With the Dragons losing £800,000-a-year, the Scarlets having recently declared an annual loss of £1.5m, and the Cardiff Blues seeking Union help to re-develop the Arms Park, the governing body see them themselves playing an increasingly significant role in the running of all four regions in the near future.

But Davies has dismissed the fears of some Newport fans that handing over their ground in return for wiping out £5m of debt is the loss of a major and historic asset for too little gain.

Davies, a former chief executive of the Dragons, said: “I have read and heard a lot of nonsense that this is an asset-stripping property deal.

“Our vision is based on four regional entities to compete, successfully I hope, in competitions and to supply players for the national team.

“Retaining the four sides is important to allow opportunities for young players coming through. We need the support of the people of Gwent: if it is not there in five years, we know where it will end.

“We have committed to safeguard the future of the game in the region and we will be doing everything in our control to not only provide continued stability for players, supporters, employees and everyone with an interest in the game in the region, but we will also be looking for rugby to thrive at Rodney Parade.

“We want Gwent to have a regional team to be proud of, a team which becomes synonymous with success both on and off the pitch for the good of the whole game in Wales and we will be utilising all of the resources and the expertise we have available to make sure that happens.”

The WRU announced on Wednesday it had taken a step closer to assuming ownership and control of the Dragons after reaching ‘heads of terms’ agreement.

Under the proposal, the region would be under WRU control, both on and off the field. The WRU would also purchase Rodney Parade.

The targeted completion date is July 1, but the takeover must have approval of shareholders of the Newport club.

WRU chief executive Martyn Phillips said: “We are not where we want to be with NGD, but it is inconceivable to us that professional rugby in that area could be lost and so we have committed to doing everything possible to ensure its future success,” Phillips said.

“All parties recognise that from an NGD perspective significant improvement is required on and off the pitch and that it is now time to take a different approach.

“This investment is equally designed to safeguard Newport RFC and its rich history at Rodney Parade and provides a long term programme where we focus on putting in solid foundations to ensure a sustainable and successful team in the region.

“Without this action the future of both the NGD and Newport RFC is at best uncertain, along with the existence of Rodney Parade.”

The WRU statement made no mention of Sky Bet League Two side Newport County, who have played their home games at Rodney Parade since 2012.

Newport Gwent Dragons employees would transfer from the region to the WRU and a new company – a subsidiary of the WRU – would be formed, free of any historic debt.

Phillips added: “There is still a lot of hard work to be completed before the proposed transaction proceeds, but it is important to recognise that there will be no magic wand.

“We have put together the very best package we can for rugby in Gwent, but there is clearly still work to be done and there is an ongoing process of due diligence to be followed in order to achieve the best outcome for Welsh Rugby.

“A WRU working party will be engaged as soon possible, to consider all of the issues raised and to provide a clear way forward in the long term.”

The WRU intends to invest in improving the Rodney Parade pitch – a 4G synthetic surface is preferred – and the region’s infrastructure to the standards of the Guinness Pro12 competition in which the Dragons compete.

Phillips added: “Initially we will focus on consolidating a high performance environment for the players and on ensuring high quality coaching.

“We know that we can only deliver on our ambitions if the communities of the region are engaged and get behind the team, but we believe that the solid foundations and sustainable future we will provide will be central to that happening.”