PGA Tour-LIV Golf merger structure revealed

Details are emerging of how the PGA Tour and Saudi-backed LIV Golf plan to merge their commercial operations and bring the sport’s top players back under one new entity.

In a five-page agreement obtained by CNBC, the parties — the PGA Tour, the Saudi Arabia Public Investment Fund and Europe’s DP World Tour — agreed to create a for-profit subsidiary of the PGA Tour. The new entity will manage commercial assets for all the tours, while the PGA Tour will manage competitions.

The tour will hold a permanent controlling interest in the new entity’s board of directors and would maintain that majority share regardless of PIF’s investments, according to the document. PIF, which agreed it will be a noncontrolling minority investor, has said it would invest billions into the entity.

Specifics regarding the valuation of the assets were still being negotiated as of the time of the agreement, which is dated May 30, and were not included in the documents.

News of the deal structure comes ahead of a Senate hearing on July 11, in which top brass of all the parties have been asked to testify.

Since its launch in 2022, LIV has been mired in controversy and criticism. The PIF is not, in fact, publicly held, as its name might suggest. It is a sovereign wealth fund controlled by the Saudi Crown Prince Mohammed bin Salman and has been accused of “sportswashing,” effectively using LIV Golf and other sports investments to improve the image of the oil-rich nation and distract from the kingdom’s history of human rights violations.

The tentative merger agreement was signed by PGA Tour Commissioner Jay Monahan, DP World Tour CEO Keith Pelley and PIF’s Yasir al-Rumayyan.

The agreement offers few other specifics about the proposed merger, which was announced earlier this month, and would put an end to all litigation between the PGA Tour and LIV Golf.

The two organizations had filed a series of antitrust claims against each other. LIV alleged anti-competitive practices for the tour banning its players. The PGA tour countersued, claiming LIV was stifling competition.

The lawsuits came after multiple high-profile players including Phil Mickelson left the PGA Tour for LIV.

The tentative agreement also ends player recruitment during the negotiation process and establishes a set of requirements to guide toward the definitive deal, including a nondisparagement clause between all the entities.

The PGA Tour board, including player directors, will have to sign off on an eventual definitive agreement, of which negotiations are still ongoing, according to a person familiar with the matter.

“There is much work to do to get us from a framework agreement to a definitive agreement,” Monahan said in a memo to players when the deal was announced.

On Tuesday, the PGA Tour policy board said it held a regularly scheduled meeting in Detroit.

In a statement, the board noted the proposed deal would end the “costly litigation” between the entities, and that the focus of the board meeting Tuesday was whether a definitive agreement could be reached.

“Management, with input from our Player Directors, has now begun a new phase of negotiations to determine if the tour can reach a definitive agreement that is in the best interests of our players, fans, sponsors, partners, and the game overall,” the board said in a statement, adding it included input from the membership through its player directors.

The board said it is committed to “the safeguards in the framework agreement that ensure the PGA Tour would lead and maintain control of this new potential commercial entity.”

When the proposed deal was announced Monahan had acknowledged the tensions between the two organizations, but said “the game of golf is better for what we’ve done today.”

The entities previously said they would establish “a fair and objective process for any players who want to re-apply for membership with the PGA Tour or DP World Tour” following the end of the 2023 season.

Meanwhile, key lawmakers are holding a Senate subcommittee hearing to put the proposed deal under the microscope.

Sen. Richard Blumenthal and Sen. Ron Johnson, the chairman and ranking member of the Senate Homeland Security Committee’s permanent subcommittee on investigations, respectively, said in a letter that the subcommittee would examine the proposed deal and the “risks associated with a foreign government’s investment in American cultural institutions, and the implications of this planned agreement on professional golf in the United States going forward.”

The PGA Tour has said its executives would testify at the hearing, although it is unclear if Monahan will be present. Monahan, who was earlier named future commissioner of the new entity, recently went on a leave of absence as he recuperates from a medical condition.