PGA Tour raises $1.5 billion from group of US investors

The PGA Tour announced Wednesday that it had reached a deal to raise more than $1.5 billion from a group of American investors led by Fenway Sports Group, the parent company of the Boston Red Sox and Liverpool Football Club.

The deal would give the PGA Tour a significant amount of cash at a time when the company faces stiff competition from its well-financed rival, LIV Golf, which is backed by Saudi Arabia's sovereign wealth fund. The influx of money raises questions about whether a deal the PGA struck six months ago to join the Saudi wealth fund is still necessary.

The PGA and the Saudi fund initially set a deadline of December 31 to work out the details and finalize their deal. That deadline has now been extended and the collaboration between the two tours has not yet been completed.

The tour's commissioner, Jay Monahan, said on a call with PGA players Wednesday before the official announcement that the tour “remains in active and frequent dialogue” with representatives of the Saudi wealth fund. He added that US investors were “aware and supportive” of negotiations with the fund. He added that he was in Saudi Arabia a few weeks ago to conduct due diligence on the proposed alliance with executives backing the U.S. investor group.

For its part, the Saudi fund has made it clear that it will continue to compete with the PGA Tour through LIV Golf in the absence of an alliance. In December, the Saudi-backed tour saw Jon Rahm, the world's No. 3 player, poached.

The tentative deal with American investors is far less likely to attract the attention of clubhouses and Congress than the Earth-shattering deal the PGA Tour struck in June to join forces with the Saudis. That deal, after months of bitter rivalry, led to criticism of Saudi Arabia's human rights abuses. The Saudi deal also lacked key details, almost immediately raising questions about its sustainability.

The American investors joining the Fenway Group include some of the most recognized names in the sports and financial worlds: Marc Lasry, founder of the Avenue Capital hedge fund and former owner of the Milwaukee Bucks; Tom Ricketts, president of the Chicago Cubs; Steven Cohen, owner of the New York Mets through his family office, the Cohen Group; and Gerald Cardinale, founder of the investment firm RedBird Capital Partners.

For them, the investment is partly a bet on renewed enthusiasm for live sports, driven by big tech that has fueled deal-making from tennis to cricket. Investors have long believed they could run the PGA Tour more efficiently.

The negotiations came with an unorthodox challenge: Because the PGA Tour has historically been a nonprofit organization, it has not had a traditional ownership structure.

But the tour creates a for-profit company to run its commercial activities. The new investors are expected to own a stake in that company, which executives have named PGA Tour Enterprises.

The PGA Tour Enterprises will now have a 13-person board, seven of whom will be players, Mr. Monahan said on the call. Four members of the US investor group will also join the board, including Fenway CEO John Henry and Home Depot co-founder Arthur Blank.

Some players will also receive shares in the new company as part of the deal, potentially calming the furore that followed the secret talks with the Saudis. PGA Tour executives have been trying to calm players down for months, even agreeing last year to demands that Tiger Woods be given a seat on the tour's board in an effort to limit the power of outside directors.

Mr Woods spoke to the players on the call on Wednesday and expressed his approval of the deal with the US investors. The call appeared to be an attempt to sidestep the frenetic way in which the Tour announced its partnership with the Saudis, an announcement that took most players by surprise.

“Golf is a great sport,” Mr Woods said. “The more we invest in the tour, the more we reap the benefits.”

Despite the player wealth, star power and fresh money, the Saudi sovereign wealth fund continues to hover over the PGA Tour. Even before its 2022 launch, it posed a danger to the PGA Tour, using big budgets to poach its stars. The Saudi fund later sued the PGA Tour for what it claimed was anti-competitive behavior, and the PGA Tour countered, presenting loyalty to the tour as an act of patriotism.

Then, surprisingly, the Americans and the Saudis outlined a plan to combine their golf activities. One of the few details of that deal was an agreement between both parties to drop their respective lawsuits.

Shortly thereafter, PGA Tour executives went to Congress to explain the deal. One of the questions they faced was why it had not looked for other investors. And the Justice Department, which had already scrutinized the PGA Tour over antitrust concerns, was preparing to review the deal. Players were almost in revolt.

The tour then began sparking talks with U.S. investors — a move that could raise money without political and regulatory scrutiny.