A big deal for golf, the PGA Tour’s planned partnership with Saudi Arabia’s sovereign wealth fund is different from the usual big deals.
The negotiations that led to the five-page framework agreement involved little outside bankers or lawyers, and very little input from the PGA Tour board.of first pact It had few binding clauses and did not assign value to assets. The plan to “take players off the board,” as PGA Tour Commissioner Jay Monahan puts it, came up as the Tour faced a Justice Department investigation over antitrust issues.
“In some ways, this looks more like a settlement to me than an actual M&A deal,” said Suni Sreepada, a partner in the M&A group at Ropes & Gray, without a final deal. He said the road to closing was complicated because of this. .
“The fact that they are willing to go public means that both parties are pretty committed to doing something,” said Mr Sripada. “But I think the question remains of who has the influence at this point, and how will this ultimately materialize?
If completed, the deal will bring together the business ventures of the PGA Tour, LIV Golf and the DP World Tour, formerly the European Tour, into a new company that will significantly reshape the economic structure of golf. Wealth funds are expected to have a significant stake in investing in the company, and Monaghan will lead the company as chief executive officer.
Despite Saudi Arabia’s turmoil over the new company’s financial resources and plans for Wealth Fund President Yasir Al Rumayyan to become chairman of the new company, PGA Tour officials said the Tour itself would not be a major player in the competition. claimed to have the upper hand. They also point out that Tour, which has previously denounced wealth fund money as filthy and immoral, will control a majority of board seats.
The Tour said earlier this month, “If all parties learn more about how the PGA Tour will lead this new venture, it will help players, fans and the sport while protecting the game of golf in the United States.” I am confident that they will understand what it will bring,” the tour said earlier this month.
Those assurances did little to curb anger at a pact that could still collapse.
Here are some of the hurdles Tour and Wealth Funds will have to overcome in a process that could take months, with a board meeting Tuesday near Detroit. If the deal is not finalized by Dec. 31, it could fall apart, allowing both sides to decide whether to “return to running their respective businesses.”
The PGA Tour board may hesitate.
The tour has an 11-member commission, including five players. Board Chairman Edward D. Herlihy and member James J. Dunn, III were involved in negotiations with the Wealth Fund, while others remain skeptical of the deal until the day it becomes public. knew little about
Once the outstanding details have been negotiated, the board will be required to sign the contract. Herlihy and Dunne are expected to vote in favor of the deal they helped craft, but most other board members have remained publicly silent or uncommitted.
“I told myself I wouldn’t agree or disagree until I knew everything, but I still don’t know everything,” 2012 U.S. Open-winning board member Webb Simpson said in a recent interview. rice field. And at a press conference on June 13, fellow board member Patrick Cantley said, “It seems too early to have enough information to have a proper picture of the situation.” rice field.
Beyond the expected support of Mr. Herlihy and Mr. Dunn, board member Rory McIlroy has shown passive support for the transaction, saying: Are they partners or enemies?
The other directors did not respond to the message or provide comment.
The board is not scheduled to vote on the proposed deal on Tuesday, as much of the deal is still being negotiated.
The Department of Justice may try to block the deal.
The Justice Department was investigating professional golf even before the deal was announced, and antitrust investigators are investigating the tour’s close ties with other major golf organizations and its efforts to block players from participating in the LIV. rice field.
The proposed partnership did not extinguish the ministry’s interest. In fact, it seems to have been strengthened.
Tour and Wealth Fund have refused to qualify the deal as a merger, but antitrust experts say the semantics may not be the issue. Even if the deal was structured as a partnership rather than an acquisition, the Justice Department could try to block it, as it did with JetBlue and American Airlines.
Mr. Monaghan has raised more skepticism in Washington by publicly stating that his main rival is no longer a threat. Antitrust lawyers said the ministry could interpret his remarks as evidence that the deal was aimed at eliminating competition, not improving sports.
But Monaghan also said the deal would help create a “productive position for the game as a whole.” The Tour will focus on this in the coming months, and by combining resources to mend the rifts in professional golf, the proposed venture will give fans more competition between the best players on the planet. Claims to offer the best of all worlds, including
Ending tensions could help get regulators to approve the deal because it’s good for consumers.
Stephen F. Ross, who taught sports law at Pennsylvania State University and served in the Department of Justice and the federal government, said, “If I were the US antitrust emperor for life, I would ban the pact, go back and compete. will say,” he said. Trade Commission.
But he said, “In the real world, neither private lawsuits nor antitrust enforcement officers have been good at policing competition between sports organizations to ensure that consumer preferences are respected.”
Given the Biden administration’s emphasis on workers, the department may also scrutinize how the deal will affect professional golfers. In a successful effort to block Penguin Random House’s proposed takeover bid for Simon & Schuster, the department’s antitrust regulator cited the potential impact on authors’ compensation.
Professional golfers, who often make millions of dollars in prize money and sponsorships, may appear less sympathetic than other groups of workers affected by corporate deals, but the agency does not support traded labor. May be keen to build case law on impact. .
Congress wants the Committee on Foreign Investment in the United States to consider the deal.
The deal has been heavily criticized in the Capitol, with a Senate subcommittee scheduled for a hearing in July. But Senate hearings cannot block the deal, so some lawmakers are asking a Treasury Department-led committee to intervene.
The Committee on Foreign Investment in the United States (CFIUS) is an interagency board with broad powers to scrutinize any transactions by foreign companies that could control U.S. businesses and threaten national interests. Control is broadly construed and can also exist in investments in minority interests.
Transactions involving golf tours do not appear to immediately trigger CFIUS review. It doesn’t contain any critical technology and probably doesn’t contain much sensitive personal data about US citizens. Treasury Secretary Janet Yellen said earlier this month that it was “not immediately clear” that the deal entailed national security concerns.
The review calls for a relationship between America’s sports giant and a branch of government “known for chilling, imprisoning, and punishing dissent,” as Ohio Democratic Senator Sherrod Brown put it. Other than a general dislike of the partnership, no specific concerns were spelled out. , and Rep. Maxine Waters, Democrat of California, put it.
But one possible reason for scrutinizing the agreements is about real estate, because CFIUS can review agreements involving real estate near sensitive military installations. One of the PGA TOUR’s largest assets that may be managed by the new commercial entity is the Tournament Players Club collection of more than 30 golf courses owned, licensed and operated by the PGA TOUR across the United States.
