After the Masters, PGA Tour commissioner Jay Monahan had a hunch.
Intuition told him that things were not going well for LIV Golf on any front. It had just lost its arbitration case against the DP World Tour in Europe, and it was struggling badly with its lawsuit against the PGA Tour in U.S. District Court in Northern California. LIV had a very poor, non-revenue-producing TV rights deal with CW Network. Fan engagement in the United States was weak, spending was out of control, executive turnover was in the headlines, and an effort to secure Official World Golf Ranking points was in limbo. The positive PR spin sought by the Kingdom of Saudi Arabia had backfired, as the term “sportswashing” became the narrative.
Maybe, thought Monahan, this was the moment for the PGA Tour to engage with LIV. Monahan had steadfastly refused to meet with LIV representatives in the rival tour’s formative years of 2020 and 2021, but as he said at the announcement of the partnership last week, circumstances had changed.
This account of the events surrounding the new partnership of the PGA Tour, the DP World Tour and the Saudi Arabia Public Investment Fund is based on interviews with numerous principals who were close to the seven-week process.
On the Friday after the Masters, Monahan, PGA Tour Policy Board chairman Ed Herlihy and board member Jimmy Dunne decided it was time to reach out to LIV. Dunne used WhatsApp to contact Yasir Al-Rumayyan, the governor of the Public Investment Fund, which is the majority owner of LIV Golf. Dunne suggested a meeting. On April 23, he and Herlihy found themselves sitting with Al-Rumayyan and his team in a private setting outside of London.
What they sought was an end to legal hostilities. What emerged was something much grander in scale.
The critical concern for the PGA Tour was the cost of the legal battle. The tour was running up tens of millions of dollars in legal bills, fees that had no end in sight if the legal drama were to continue into 2024 or 2025. This was not a sustainable situation for the PGA Tour.
Al-Rumayyan is a Saudi businessman who studied at Harvard Business School. In addition to overseeing the PIF, he serves as the chairman of English football club Newcastle United and the chairman of state-owned petroleum company Saudi Aramco. He came to golf later in life and is serious about the game.
Herlihy is the co-chairman of Wachtell, Lipton, Rosen & Katz, a New York law firm, and he is generally regarded as one of the smartest and toughest lawyers in America. A passionate golfer, he is a member at Augusta National, among others. He has served on the PGA Tour Policy Board since 2017. By Herlihy’s invitation, Dunne joined the PGA Tour Policy Board in November.
Dunne lives large in the game of golf. A lifelong and skilled player, he also the president of Seminole Golf Club and a member at Shinnecock Hills in New York. In 2020, he sold his company, Sandler O’Neill, to Piper Jaffray. Though he serves as chairman of what is now known as Piper Sandler, he has ample time for golf.
What Dunne and Herlihy encountered surprised them. They found Al-Rumayyan to be honorable, reasonable, and straightforward. He was not of government, and he wasn’t interested in discussing foreign policy. He was of sport, and he wanted the PIF to be in golf.
During their time together, Al-Rumayyan learned more about the PGA Tour and how it worked. He was impressed by Herlihy and Dunne and thought that these were people with whom he could do business. More than anything else, Al-Rumayyan realized that there might be an elegant exit from the problem that was LIV Golf.
LIV had become a rogue enterprise in the PIF portfolio. Al-Rumayyan thought that the team aspect of it had legs, and he thought it was helping to create interest in the game among a younger generation. But it wasn’t gaining traction in the marketplace, and it was hemorrhaging money. It needed new leadership and management, the kind that could be provided by the PGA Tour.
Though LIV had fired the first shot via the federal antitrust lawsuit, Al-Rumayyan also wanted to bring an end to the legal process. The thought of having its sovereign immunity denied and having to comply with American jurisprudence was a nonstarter for the PIF. The precedent-setting nature of U.S. legal exposure could be averse to PIF’s numerous American investments. Al-Rumayyan wanted peace.
Dunne and Herlihy returned to America thinking that a compromise was possible.
The critical concern for the PGA Tour was the cost of the legal battle. The tour was running up tens of millions of dollars in legal bills, fees that had no end in sight if the legal drama were to continue into 2024 or 2025. This was not a sustainable situation for the PGA Tour, which had dipped into reserves this year to create 12 “designated events” with $20 million purses to counter LIV’s ongoing threat to poach players. The tour needed a new strategy. It was time for a transformative deal.
Subsequent to the London meeting, Herlihy, Dunne and Monahan met with Al-Rumayyan in mid-May in Venice, Italy. They came away from that meeting with a handshake understanding of how a partnership would proceed. More than once, the deal looked as if it might slip away, but the small number of people involved – fewer than 10 combined from both sides – stayed with it. The bombshell announcement took place Tuesday on CNBC, an affiliate of tour broadcasting partner NBC Sports, and no one outside of the tight circle of dealmakers knew about it. Certain players and organizations got a heads up, but that took place just minutes before the announcement.
The “framework agreement” was presented by CNBC as a merger, but it is not. The deal is more akin to a joint venture. This mischaracterization caused many LIV players to think they automatically would be welcomed back on their respective tours; that is not at all the case, which they are beginning to understand.
A for-profit entity that was created – called Newco, at the moment – will be majority-owned by the PGA Tour. It is expected to house the PGA Tour and DP World Tour media rights, sponsorship revenue, and consumer revenues, as well as LIV Golf. In time, it may make investments and acquisitions. It could invest in TMRW Sports, the new golf venture founded by Tiger Woods and Rory McIlroy. It also could acquire enterprises such as Puttery or PopStroke. It might find itself involved in golf course development or management, and it could wind up the owner of the Sawgrass Marriott, long a problem child for the PGA Tour.
The billions of dollars of PIF money being bandied about will go to Newco, not to PGA Tour or DP World Tour operations. Newco has Al-Rumayyan as its chairman, but Herlihy, Dunne and Monahan will serve alongside him on the executive committee, thereby ensuring control of Newco.
Jay Monahan will continue to run the PGA Tour, which will remain a 501(c)(6) not-for-profit organization, reporting only to the PGA Tour Policy Board, as he always has. He also will assume oversight of LIV Golf and continue to serve on the DP World Tour board. DP World Tour CEO Keith Pelley will continue to report to that same board. Neither executive will report to Al-Rumayyan, who now sits among the leaders of the game but is by no means the czar of golf. The strategic alliance between the PGA Tour and the DP World Tour will continue as is.
Monahan and his Policy Board face yeoman’s work to get the players to sign on to this partnership. And they must dodge regulatory action that could slow down implementation of the formal agreement.
At the end of the day, what the PIF got was what it has wanted since early 2021: participation at the highest level of golf and a seat at the table with the executives who run the game. Most importantly, it got what Al-Rumayyan always coveted: a relationship with the PGA Tour.
What becomes of LIV Golf? It probably will disappear at the end of the year. Some team format likely will find its way onto the tour schedules, but that will be considered well down the road.
Players who left the PGA Tour and the DP World Tour will have to apply for reinstatement after the 2023 season if they wish to return. This is going to be a very contentious situation to navigate, as many tour players on both sides of the Atlantic do not believe that LIV players should be welcomed back. The voices of tour members who turned down lucrative signing bonuses from LIV will be carefully considered. The price of that reinstatement will be steep, and some of that money may find its ways into the pockets of players who remained loyal to the PGA Tour. Dunne floated a shrewd idea late Friday afternoon, suggesting that the key loyalists be given equity in Newco. Something will have to be done to placate the loyalists, to ensure that this deal moves forward.
An awful lot must be accomplished in a very short amount of time to bring this deal to fruition, ideally by Labor Day. Monahan and his Policy Board face yeoman’s work to get the players to sign on to this partnership. And they must dodge regulatory action that could slow down implementation of the formal agreement.
However, in the fullness of time, this unification of the global game may well be looked upon as every bit as important as the creation of the modern PGA Tour in 1968 and the formation of the European Tour in 1972.
E-MAIL JIM
TOP PHOTO: Minas Panagiotakis, Getty Images