The PGA Tour announced Wednesday that it has reached a deal to raise at least $1.5 billion from a group of U.S. investors, a move that raises new questions about whether a proposed partnership with a rival tour backed by Saudi Arabia’s sovereign wealth fund is forthcoming. fruition.
The PGA Tour’s influx of funds, which is expected to reach up to $3 billion, is being led by Fenway Sports Group, the parent company of the Boston Red Sox and Liverpool Football Club. The tour is simultaneously negotiating a partnership with its deep-pocketed rival, LIV Golf.
The deal, announced in June, was effectively an admission that the PGA Tour did not have enough money to compete with the hundreds of millions of dollars Saudi funds had prepared to invest in the sport. Many prominent players have already left the PGA Tour for the LIV Tour.
The PGA Tour and the Saudi fund initially set a Dec. 31 deadline to discuss details and finalize the alliance. That deadline has since been extended and the partnership between the two tours is not yet complete. The question now is whether the deal with U.S. investors changes the PGA Tour’s calculus.
Tour commissioner Jay Monahan said on a call with PGA Tour players Wednesday before the official announcement that the tour “continues to have active and frequent conversations” with representatives of Saudi asset funds. He added that U.S. investors were “aware of and supportive” of the negotiations with the fund and that he had visited Saudi Arabia a few weeks ago to conduct due diligence on the proposed partnership with management supporting a group of U.S. investors.
The Saudi fund has made it clear that in the absence of an alliance, it will continue to compete with the PGA Tour through LIV Golf. Last December, the Saudi-backed tour recruited world No. 3 Jon Rahm.
A fund spokeswoman declined to comment.
A tentative agreement with U.S. investors is much less likely to draw the ire of clubhouses and Congress than a landmark decision to combine the Saudi military. The deal, which followed months of intense competition, sparked criticism over human rights abuses in Saudi Arabia. The Saudi deal also lacked key details, raising questions about its durability almost immediately.
Among the U.S. investors joining Fenway Group are some of the most recognizable names in sports and finance. Marc Lasry, founder of hedge fund Avenue Capital and former owner of the Milwaukee Bucks; Chicago Cubs President Tom Ricketts; Steven Cohen, owner of the New York Mets through his family office, the Cohen Group; and Gerry Cardinale, founder of investment firm RedBird Capital Partners.
For them, the investment is a bet on a new enthusiasm for live sports, partly fueled by the big tech that has helped seal deals in everything from tennis to cricket. Investors have long believed the PGA Tour could be run more efficiently.
The negotiations presented a peculiar problem. Because the PGA Tour has historically been a non-profit organization, it has not had a traditional ownership structure.
However, the tour is forming a for-profit company to run its commercial business. The new investors are expected to take a stake in the business, which management has named PGA Tour Enterprises.
PGA Tour Enterprises will now have a board of 13 members, seven of whom will be players, Mr. Monaghan said on the call. Four members of the American investment group, including Fenway CEO John Henry and Arthur Blank, co-founder of Home Depot and owner of the Atlanta Falcons, are also scheduled to join the board of directors.
Some players will also receive shares in the new company as part of the deal, which could put to rest any furore over secret talks with the Saudis. The tour also said it is considering allowing PGA Tour members to participate in a program that would allow them to benefit financially from tour success. Under the program, players will receive grants that are awarded over time based on, among other things, career accomplishments.
“By making PGA Tour members owners of the league, we will strengthen our players’ collective investment in the success of the PGA Tour,” Monaghan said in a statement accompanying the announcement.
PGA Tour executives have struggled for months to appease players, and last year even called for Tiger Woods to have a seat on the Tour’s board of directors in an effort to limit the power of outside directors.
Mr. Woods spoke on a call with players on Wednesday, expressing approval of the deal with U.S. investors. The call appeared to be an attempt to avoid the frenzied manner in which the Tour announced its partnership with the Saudis, an announcement that took most players by surprise.
“Golf is an amazing sport,” Woods said. “The more you invest in your tour, the more you will benefit.”
Despite player assets, star power and new money, Saudi Arabia’s sovereign fund continues to threaten the PGA Tour. Even before its introduction in 2022, it was a risk for the PGA Tour, which spends huge budgets to poach stars. The Saudi fund later sued the PGA Tour, alleging anti-competitive conduct, while the PGA Tour countered and framed its loyalty to the Tour as an act of patriotism.
Then, surprisingly, the United States and Saudi Arabia planned to merge their golf businesses. One of the meager details of the deal included that both sides agreed to drop the lawsuit.
Soon after, PGA Tour executives went to Congress to explain the deal. Among the questions they faced was why they didn’t seek out other investors. And the Justice Department, which has already been scrutinizing the PGA Tour over antitrust concerns, prepared to review the deal. The players were almost in revolt.
The tour then began talking to U.S. investors, which eventually led to investments from Fenway Sports Group and others.
