The big news in the sports world yesterday was that the PGA Tour is going to merge with LIV Golf which is owned by the Saudi Public Investment Fund (PIF).
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| Source: https://www.outkick.com/pga-tour-merges-liv-golf-partnership-saudi/ |
Sources close to negotiations told Fox on Tuesday that a new partnership between the Tour, LIV Golf, and DP World Tour “are entering into a new, landmark partnership and merging all of their businesses into a new, collectively owned, for-profit entity.”
The Saudi Public Investment Fund will reportedly be the “exclusive investor” into the new venture.
According to CNBC, the two sides’ signed agreement would combine the PGA Tour and LIV Golf’s commercial business and right into a new, to-be-named company.
The as-yet named for profit umbrella organization will effectively own and run the PGA Tour, the DP World Tour and whatever remains of LIV Golf after the merger is completed.
It is said that the PGA Tour will continue to operate as a 501(c)(6) non profit organization in overseeing and sanctioning PGA Tour events.
The merger is not a surprise to me.
Less than a year ago I stated that I did not believe that LIV would live more than three years as an independent golf tour.
This is what I wrote in that blog post, "Will The LIV Golf Tour Live?"
For the most part, it is easy to understand why the players that have jumped to LIV have done so.
There is a lot of big money being thrown around by the Saudis.
$25 million. $100 million, $200 million guarantees.
It is tougher for me to figure out what is the end game for the Saudis.
If they are investing a billion dollars or more in a fledging golf tour they undoubtedly expect a return on that investment.
They clearly have to expect that the PGA Tour will ultimately pay them off someway (through a legal settlement) or some type of merger will eventually occur that allows them a return on the money they are putting into this.
This has usually been the outcome when other upstart professional leagues (AFL, ABA etc) set out to compete with established pro circuits.
I predicted that money would drive the end result.
Many details remain to be worked out before all of this is finalized.
The Saudis funded LIV to make money. They were using money from their public investment fund to do it. They did not get into golf to lose a bunch of money.
Their end goal was obviously to get a piece of the lucrative PGA Tour pie through a merger or legal settlement.
It appears they succeeded and much quicker than I could have imagined.
I can understand the reasons for the merger.
I do not understand why PGA Tour Commissioner Jay Monahan would feel the need to do this now.
LIV was clearly struggling to draw fans and sponsors.
It had very little visibility in the sports world and its tv ratings were abysmal due to its inability to get a major network to carry LIV and the few advertisers or sponsors who showed much interest in the product.
LIV was bleeding money.
The early legal skirmishes on the anti-trust litigation that LIV had filed favored the PGA Tour.
What is even crazier is that in those lawsuits LIV was arguing that the PGA Tour was operating as a monopoly. Now that all of professional golf will be controlled under one umbrella what do you call that?
You would think there has to be some question whether the American and European government authorities might even challenge the merger on anti-trust issues themselves.
I also wonder if there were issues in the legal case that the PGA Tour did not want disclosed and/or it believed the litigation would be both too costly and disruptive to not seek resolution sooner rather than later.
I guess it goes to show how in the end, money always wins.
What is perplexing in all of this is that Monahan could have probably gotten a deal like this to get Saudi money before LIV ever held one event.
We don't know how much Saudi money is involved but you have to believe it is considerable.
First of all, the Saudi PIF will make an financial investment to have a minority equity stake in the new for-profit entity that will effectively own and control the PGA Tour, DP World Tour and LIV Tour.
Notice the important words there---FOR PROFIT.
Who will be the Chairman of this new for-profit entity that controls worldwide professional golf?
This man.
Yasir Al-Rumayyan who is Governor of the Public Investment Fund and Chairman of Saudi Aramco.
Jay Monahan is slated to be the Chief Executive Officer.
Of course, Monahan is also the person who exactly a year ago was warning players who were thinking about joining the Saudi-backed LIV Tour to check their moral compass in light of the well known human rights issues, not to mention the memories of 9/11. associated with the Saudi kingdom.
“It probably is an issue for players that chose to go and take that money ... and I think you’d have to be living under a rock to not know that there are significant implications,” Monahan said.
I always thought that the "sports washing argument" against LIV Golf was pretty weak in that so many other sports and other activities were already tied in with Saudi Arabia--the LPGA, tennis, soccer, auto racing, etc. In addition, how many of the PGA Tour's major sponsors did not already have considerable financial interests tied in with Saudi Arabia?
I also never understood Monahan making such a point of that when arguing against LIV. It made even less sense considering that the most likely outcome of all of this is where we find ourselves now.
Monahan's hypocrisy about Saudi money is astounding. He was against it until he saw the opportunity to get a piece of it?
As a result, Monahan is going to be living with the legacy of hypocrisy for a long time.
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| Source: https://www.latimes.com/sports/story/2023-06-06/commentary-on-pgas-merger-with-liv |
He is arguing that 10 years from now is when the wisdom of this merger will be clear.
That may prove true.
However, I will be surprised if Jay Monahan will be a big part of the future of the PGA Tour to see that through.
He has many fences to mend with the PGA Tour players who were loyal to him and the Tour.
Many turned down large financial guarantees from LIV to remain loyal to the PGA Tour.
Monahan has made those players look awfully foolish.
Right now it looks like he has betrayed their trust in a big, big way.
Once again, there was one guy who could see all of this coming over the horizon.
Say what you want about Trump. However, he has a unique ability to see the world as it is and speak to that reality. He also knows that in the end, money always wins.
Monahan will also have to answer as to why he did not do this deal a year ago, and forestall all of the disruption and distractions, if this is where all of this ends up anyway.
I also have a hard time seeing that Monahan will be able to again have the trust of the PGA Tour players.
Do all of the LIV players get a free pass back on the PGA Tour and also keep their multiple-million dollar guarantees? Are the Saudis going to pay off those players in addition to their equity investment in the PGA Tour? Or do those LIV contract guarantees now effectively come out of the pockets of McIroy, Scheffler, Rahm, Spieth, Matsuyama, Hovland, Justin Thomas and the rest of the PGA Tour players?
If Monahan does not have that trust, how can he continue as their leader?
This deal proves that in the end, money always wins.
If Monahan is to survive, it will be because he can show his players that they are all going to get a lot richer because of the infusion of the Saudi money.
Perhaps that will be the case.
In the end, money always wins.
However, the Saudis did not fund LIV initially, and is not going to put all of this additional money into the PGA Tour, unless they expect to get a return on their investment.
That money has to come from somewhere other than the Saudis.
They are going to expect revenues and dividends to be paid up to the FOR PROFIT entity that they are investing in.
That money has to come from PGA Tour, DP World Tour and LIV (if it survives as a separate entity) events, tv or licensing deals. Any money that goes to the for-profit parent company means it is coming out of tournament purses for the players or the charities that now benefit from PGA Tour events.
Perhaps in the end the money can also win over the PGA Tour players.
However, the Saudis are going to need to do all they can to keep oil prices high so that there is enough money flowing to keep everyone happy in professional golf.
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| Source: https://www.cbsnews.com/news/saudi-arabia-cutting-oil-supply-gas-prices-opec/ |
All of this is similar to the NBA taking money from China and avoiding any criticism of the CCP many human rights violations. Follow the money is the answer to most questions regardless decisions that appear questionable.
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