PGA Tour and LIV announce shock merger to end bitter split

 

[June 07, 2023]  By Frank Pingue

(Reuters) -The world of golf was left stunned on Tuesday as the PGA Tour, DP World Tour and rival Saudi-backed LIV circuit, who have been involved in a bitter fight that has split the sport, announced a shock agreement to merge and form one unified commercial entity.

Additionally, the organizations said in a joint news release they will work together to allow a process for LIV Golf players to reapply for membership on the PGA Tour and DP World Tour, formerly known as the European Tour, following the 2023 season.

The bombshell announcement was slammed by many PGA Tour players who were left in the dark about the merger and comes after a very public war of words between all the sides, mounting tensions and a bitter legal battle.

"After two years of disruption and distraction, this is a historic day for the game we all know and love," said PGA Tour Commissioner Jay Monahan, who had long been a vocal critic of LIV Golf.

"How did we go from a confrontation to now being partners? We just realized that we were better off together than we were fighting or apart," he told reporters following an "intense" meeting with Tour golfers to discuss details of the deal.

No details were given as to how the agreement will impact the current competitive golf landscape, including eligibility for this year's Ryder Cup, though the parties did say they will work in the coming months to finalize terms of the merger.

The LIV Golf series is bankrolled by the Saudi Arabia Public Investment Fund and critics have accused it of being a vehicle for the country to attempt to improve its reputation in the face of criticism of its human rights record.

Much of the backlash centers around the alleged involvement of the Saudi Arabian government in a multitude of human rights violations, including the murder of Washington Post journalist Jamal Khashoggi in 2018.

The deal announced on Tuesday is a binding framework agreement but the financial terms have not been hashed out yet, a source familiar with the matter said.

Michael Klein & Co will conduct valuation work on LIV's assets and Allen & Co will conduct valuation work on the PGA Tour's assets before the price at which the merger will happen gets determined, the source added.

A mechanism is included in the agreement to resolve any valuation disputes, the source said, without elaborating further.

EXCLUSIVE INVESTOR

The announcement of the merger includes an agreement to end all pending litigation between the participating parties.

Additionally, the Public Investment Fund (PIF) will make a capital investment into the new entity to facilitate its growth and success.

PIF, which owns more than 90% of LIV, plans to invest billions of dollars in order to have a sizeable minority stake in the combined company, a person familiar with the matter said.

"Today is a very exciting day for this special game and the people it touches around the world," said PIF Governor Yasir Al-Rumayyan.

"We are proud to partner with the PGA Tour to leverage PIF's unparalleled success and track record of unlocking value and bringing innovation and global best practices to business and sectors worldwide."

Monahan said the agreement was in the best interests of PGA Tour members, though he described a closed-door meeting with the players, where some called for his resignation, as "intense" and "heated." 

"It puts us in a position of control and allows us to partner with the PIF in a constructive and productive way," said Monahan.

"I recognize that people are going to call me a hypocrite.

"Anytime I said anything, I said it with the information that I had at that moment ... I accept those criticisms. But circumstances do change."

LIV Golf, which features 54-hole events with no cuts instead of the traditional 72-hole format, launched in 2022 and lured big-name players away from the rival circuits with staggering sums of prize money for every golfer.

The PIF will initially be the exclusive investor in the new entity and the board of directors will include Al-Rumayyan as chairman and the PGA Tour's Monahan as CEO.

After years of acrimony the deal seems to have come together quickly with little fuss and no leaks – despite it being one of the biggest commercial stories in the history of sport.

Al-Rumayyan told CNBC that he and Monahan met in London.

Golf - The Masters - Augusta National Golf Club - Augusta, Georgia, U.S. - April 4, 2022 Japan's Hideki Matsuyama skims the ball on the 16th pond during a practice round REUTERS/Mike Segar/File Photo

"We had a lunch followed by the next day a round of golf and then another lunch. We had discussions and we covered everything. I think it will be a matter of weeks (for a definitive agreement to be settled)."

Monahan added: "I give Yasir great credit for coming to the table, coming to discussions with an open heart and an open mind. We did the same and the game of golf is better for what we've done here today."

The PGA Tour, which is a non-profit organization, confirmed in July 2022 that the U.S. Justice Department was investigating whether it broke antitrust law in fighting off LIV.

The PGA had sought to fend off the competition by barring its players from participating in the breakaway circuit.

That said, one antitrust expert said that the PGA/LIV deal would be approved and two others said it was too close to call.

"This is entertainment. I think that would make it a less priority for the antitrust enforcers," said Seth Bloom of Bloom Strategic Counsel.

MIXED REACTION

Among the more popular players who made the move to LIV Golf are Hall of Fame golfer Phil Mickelson, former world number one Dustin Johnson, reigning PGA Championship winner Brooks Koepka and 2022 British Open winner Cameron Smith.

"Awesome day today," tweeted Mickelson, whose public image took a hit in February 2022 when the author of an unauthorized biography on him released excerpts from the book in which he called the Saudis "scary" but said he was willing to look past their human rights records to gain leverage with the PGA Tour.

Some PGA Tour players expressed surprise at having not been informed of the agreement before its announcement.

"I love finding out morning news on Twitter," wrote two-times major champion Collin Morikawa.

Former U.S. President Donald Trump, who owns three courses that are part of LIV Golf's 14-event schedule in 2023, celebrated the deal in a Truth social post using all caps.

"Great news from LIV Golf. A big, beautiful, and glamorous deal for the wonderful world of golf. Congrats to all!!!"

Since its launch, LIV players have only competed alongside their former colleagues at the majors as those four blue-riband events on the golf calendar are not run by either the PGA Tour or DP World Tour but by independent institutions.

Many of those who accepted lucrative signing bonuses to join LIV Golf cited as their reason for making the leap a desire to play fewer events and spend more time with their families.

Advocacy groups 9/11 Families United and Democracy for the Arab World Now, which was founded by Khashoggi, were among the organizations that denounced the deal.

Fifteen of the 19 hijackers on Sept. 11, 2001 were from Saudi Arabia. However, the kingdom has long denied a role in the attacks on the Twin Towers, which killed nearly 3,000 people.

"Jay Monahan co-opted the 9/11 community last year in the PGA (Tour's) unequivocal agreement that the Saudi LIV project was nothing more than sportswashing of Saudi Arabia's reputation," 9/11 Families United said in a statement.

"Now the PGA and Monahan appear to have become just more paid Saudi shills, taking billions of dollars to cleanse the Saudi reputation so that Americans and the world will forget how the Kingdom spent their billions of dollars before 9/11 to fund terrorism, spread their vitriolic hatred, and finance al Qaeda and the murder of our loved ones."

(Reporting by Frank Pingue in Toronto; Additional reporting by Diane Bartz, Greg Roumeliotis, Jonathan Landay, Mitch Phillips and Rory Carroll; Editing by Alex Richardson, Christian Radnedge, Toby Davis and Peter Rutherford)

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