The PGA Tour said Wednesday it had reached an agreement to raise more than $1.5 billion from a group of U.S. investors, a move that raised fresh questions about whether a proposed alliance with a rival tour backed by the Sovereign Wealth Fund of Saudi Arabia will come to fruition.
The influx of money into the PGA Tour, which could reach $3 billion, is being led by Fenway Sports Group, the parent company of the Boston Red Sox and Liverpool Football Club. It comes as the tour simultaneously negotiates a partnership with well-funded rival LIV Golf.
That deal, announced in June, was essentially an admission by the PGA Tour that it didn’t have enough money to compete with the hundreds of millions of dollars Saudi Arabia’s coffers were prepared to pour into the sport. Several prominent players had already left the PGA Tour for the LIV Tour.
The PGA Tour and Saudi Arabia’s fund originally set a Dec. 31 deadline to work out details and finalize their alliance. That deadline has since been extended and the partnership between the two tours has yet to be completed. The question now is whether the deal with the US investors changes the PGA Tour’s calculus.
Tour commissioner Jay Monahan said Wednesday on a call with PGA Tour players before the official announcement that the tour “remains in active and frequent dialogue” with representatives of Saudi Arabia’s wealth fund. He added that US investors were “conscious and supportive” of their dealings 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 who support the U.S. investor group.
The Saudi fund, for its part, has made it clear that it will continue to compete with the PGA Tour through LIV Golf if no alliance is struck. In December, the Saudi-backed tour chased Jon Rahm, the third-ranked player in the world.
A spokesman for the fund did not immediately respond to a request for comment.
The tentative deal with American investors is far less likely to draw fire from the clubs and Congress than the disastrous decision to join forces with the Saudis. That deal, after months of hard-fought competition, drew criticism for Saudi Arabia’s human rights abuses. The deal with Saudi Arabia also lacked important details, almost immediately raising questions about its durability.
Among the American investors joining the Fenway Group are some of the best-known names in sports and finance: Marc Lasry, founder of the hedge fund Avenue Capital and former owner of the Milwaukee Bucks; Tom Ricketts, president of the Chicago Cubs. Steven Cohen, the New York Mets owner through his family office, the Cohen Group. and Gerry Cardinale, founder of investment firm RedBird Capital Partners.
For them, the investment is partly a bet on the renewed enthusiasm for big tech-driven live sports that has led to deals in everything from tennis to cricket. Investors have long believed they could run the PGA Tour more efficiently.
The negotiations presented an unorthodox challenge: Because the PGA Tour has historically been a nonprofit entity, it did not have a traditional ownership structure.
But the tour is setting up a for-profit company to run its commercial operations. The new investors are expected to close with a stake in that venture, 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 chief executive of Fenway, and Arthur Blank, co-founder of Home Depot and owner of the Atlanta Falcons.
Some players will also receive equity in the new company as part of the deal, potentially easing the furore that followed the secret talks with the Saudis. The tour also said it is considering allowing PGA Tour members to participate in a program that would allow them to benefit financially from the tour’s success. Under this program, players will receive grants that will be compounded over time based on, among other things, their career achievements.
“By making PGA Tour members owners of their championship, we strengthen our players’ collective investment in the success of the PGA Tour,” Mr. Monahan said in a statement accompanying the announcement.
PGA Tour executives have been trying for months to placate players and even agreed last year to demands that Tiger Woods take a seat on the tour’s board of directors in an effort to limit the power of outside directors.
Mr. Woods spoke on Wednesday’s call with the players, expressing his approval of the deal with the American investors. The call appeared to be an attempt to avoid the frantic way in which the tour announced its partnership with the Saudis, an announcement that caught most players by surprise.
“Golf is an amazing sport,” Mr Woods said. “The more we invest in the tour, the more we reap its benefits.”
Despite player equity, star power and fresh money, Saudi Arabia’s sovereign wealth fund continues to be above the PGA Tour. Even before its introduction in 2022, it was a risk on the PGA Tour, using big budgets to chase its stars. The Saudi fund later sued the PGA Tour for what it claimed was anti-competitive behavior, and the PGA Tour fought back and called the tour loyalty an act of patriotism.
Then, surprisingly, the Americans and Saudis sketched out a plan to combine their golf businesses. One of the minimal details of that deal included an agreement by both sides to drop their respective lawsuits.
Soon after, PGA Tour officials went before Congress to explain the deal. Among the questions they faced was why he had not sought other investors. And the Justice Department, which had already scrutinized the PGA Tour for antitrust concerns, prepared to review the deal. The players were almost in revolt.
The tour then began to open talks with US investors, which eventually led to the investment of Fenway Sports Group and others.
