Sportonomics: A Somewhat Brief Synopsis on the PGA and Saudi deal

We have all heard about the PGA Tour and Saudi Arabia's sovereign wealth fund (LIV Golf). Whether the Saudi investment laid the PGA Tour’s moral standings to waste is a different topic for another day. Here's a synopsis of all that's happened in the agreed merger so far.

With large sums enticing players to leave the PGA Tour and a pledge to be “golf, but louder,” LIV Golf disrupted the men’s professional ranks once it began holding tournaments last year.  Doug Mills/The New York Times.

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The PGA Tour has agreed to merge with Saudi-backed rival LIV Golf, effectively leading to a (partial) Saudi ownership of the PGA tour. The deal, although unexpected, has its mutual benefits for both sides as the merger comes after both the PGA Tour and LIV Golf have been embroiled in lawsuits regarding antitrust claims. Expectedly, the deal ends all pending litigation. To go into the specifics of the merger, it combines both tours’ commercial businesses and rights (such as the extremely lucrative rights to televise the PGA tournaments) into a new, yet-to-be-named for-profit company. The agreement also includes the DP World Tour (PGA European Tour). 

The controversy around the deal surrounds LIV Golf being backed by the Saudi Arabia Public Investment Fund, an entity controlled by Saudi Crown Prince Mohammed bin Salman and has been embroiled in antitrust lawsuits with the PGA Tour. The Saudi PIF is prepared to invest billions of new capital into the new entity. The board of directors for the new for-profit entity would be led by Yasir al-Rumayyan, who is the current governor of the Public Investment Fund and also oversees LIV Golf. Three other members of the board’s executive committee would be current members of the PGA Tour’s board, and the tour would also appoint the majority of the board and hold a majority voting interest, effectively controlling it. A crucial step and a current worry is how the tour and PIF will come to terms on the values of the assets that each will contribute to their expected partnership. Accordingly, both bankers and lawyers have begun the valuation process in recent weeks but according to the NYT, it obtained a five-page framework agreement with no substantive details of projected figures nor the size of an anticipated cash investment from the wealth fund. The merger faces other obstacles before it can be finalized. After facing pressure from the Justice Department, a non-solicitation clause which both parties agreed on was abandoned. The clause said the PGA Tour and LIV Golf would not “enter into any contract, agreement or understanding with” any “players who are members of the other’s tour or organization.” The other obstacle is that the deal still needs approval from the PGA Tour’s policy board (board of directors), which includes some people who were left out of the secret negotiations for this deal in the spring. The policy board has five independent directors, including Ed Herlihy and Jimmy Dunne, who both aided in the negotiations of the deal. The board also includes five players: Patrick Cantlay, Charley Hoffman, Peter Malnati, Rory McIlroy and Webb Simpson. 

South African golfer Charl Schwartzel plays a last shot during the LIV Golf Invitational Series in St. Albans, England, in June 2022. The launch of the series rocked the world of golf by setting up rival leagues.Adrian Dennis/AFP via Getty Images

Looking into the rest of 2023, all the tours will remain completely separate and all their tournaments will continue as scheduled. For the LIV players, the deal is a major victory, garnering huge paydays and a speedy path to returning to the PGA Tour too. It’s a different story for players of the PGA Tour though. They (the players) felt and were blindsided by the news, learning of the agreement only when the public did. Not only that, but similar to the public, the players did not seem to understand why the tour waged a legal war against LIV and a morality war against Saudi money, only to welcome them not much later. PGA Tour commissioner Jay Monahan certainly doesn’t come out of this deal looking sharp. He has been quoted as saying “As long as I'm commissioner of the PGA Tour, no player that took LIV money will ever play the PGA Tour again.” He has lost both trust and confidence from PGA players along with former players and some leadership. Monahan emphasized in interviews that the agreement came down to money and competition. Afterall, to compete with LIV, the PGA Tour has increased spending. Monahan also said being able to “take the competitor off of the board” while retaining control was significant. 

The question of whether the Saudi PIF will always remain a junior partner to the PGA Tour in golf can be answered by PIF’s governor al-Rumayyan saying the PIF will invest billions into the new for-profit entity. The PIF also reserves the exclusive right to invest more money at any time into the new entity. If the Public Investment Fund does invest more, it will certainly demand more board seats and greater voting rights, moving control of men’s professional golf towards Saudi control.