The PGA Tour announced Wednesday that it had 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 alliance with a rival tour backed by the sovereign wealth fund of Saudi Arabia, will become a reality. bloom.
The PGA Tour’s money pipeline, which could eventually reach as much as $3 billion, is being led by Fenway Sports Group, the parent company of the Boston Red Sox and Liverpool Football Club. The tour is also negotiating a partnership with its well-funded rival, LIV Golf.
That deal, announced in June, was essentially an admission by the PGA Tour that it did not have enough money to compete with the hundreds of millions of dollars the Saudi fund was willing to pour into the sport. A number of prominent players had already left the PGA Tour for the LIV tour.
The PGA Tour and the Saudi fund initially set a December 31 deadline to work out details and end their 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 American investors changes the calculus of the PGA Tour.
The tour’s commissioner, Jay Monahan, said on a call with PGA Tour 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 U.S. investors were “aware and supportive” of the fund’s negotiations, and that he was in Saudi Arabia a few weeks ago to conduct due diligence on the proposed alliance with executives representing the U.S. support investor group.
The Saudi fund has made it clear it will continue to compete with the PGA Tour through LIV Golf if there is no alliance. In December, the Saudi-backed tour poached Jon Rahm, the world’s third-best player.
A spokesperson for the fund declined to comment.
The tentative agreement with the American investors is far less likely to draw criticism from clubhouses and Congress than the earth-shattering decision to join forces with the Saudis. That deal, after months of bitter rivalry, drew criticism for human rights abuses in Saudi Arabia. The Saudi deal also lacked key details, raising questions about its sustainability almost immediately.
The American investors joining the Fenway Group include some of the best-known names from 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 Gerry Cardinale, founder of the investment firm RedBird Capital Partners.
For them, the investment is partly a bet on renewed enthusiasm for live sports, fueled by big tech that has led to deal-making in everything from tennis to cricket. Investors have long believed they could run the PGA Tour more efficiently.
The negotiations presented an unconventional challenge: Because the PGA Tour is historically a nonprofit organization, it does not have a traditional ownership structure.
But the tour is in the process of setting up a for-profit company to run its commercial businesses. The new investors are expected to get a stake in that company, which executives have named PGA Tour Enterprises.
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 John Henry, the CEO of Fenway, and Arthur Blank, co-founder of Home Depot and the owner of the Atlanta Falcons.
Some players will also receive shares in the new company as part of the deal, which could potentially calm the furor that followed the secret talks with the Saudis. The tour also said it was considering allowing PGA Tour members to participate in a program that would allow them to benefit financially from the tour’s success. Under that program, players would receive grants awarded over time based on career performance, among other things.
“By giving PGA Tour members ownership of their own leagues, we are strengthening our players’ collective investment in the success of the PGA Tour,” Mr. Monahan said in a statement accompanying the announcement.
PGA Tour officials have been trying to calm players for months, even agreeing last year to require Tiger Woods to sit on the tour’s board of directors in an effort to limit the power of outside directors.
Mr. Woods spoke to players on Wednesday’s call and endorsed the deal with the American investors. The call appeared to be an attempt to sidestep the frenetic manner in which the tour announced its partnership with the Saudis, an announcement that took most players by surprise.
“Golf is a great sport,” said Mr. Woods. “The more we invest in the tour, the more we benefit from it.”
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 introduction, 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 lawsuit.
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 to spark discussions with American investors, eventually leading to the investment by the Fenway Sports Group and others.
