PGA-DPWT-LIV Merger Starts Taking Shape

Less than a month has passed since the very unexpected announcement that the PGA TOUR, DP World Tour, and LIV would be unifying into one “super league.”  And it really shouldn’t have been that surprising that after Commissioner Jay Monahan had some very unfavorable things to say about LIV and its Saudi backing through the Public Investment Fund (PIF), that members of Congress decided to capitalize on the moment and challenge the legitimacy of the merger.

In an effort to give further legitimacy to this combination, the PGA TOUR, DP World Tour, and PIF entered into a 5-page “Framework Agreement,” dated May 30, 2023, that provides a very vague, loose outline for the combination of the leagues.

 

 

 

 

 

 

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The Agreement starts by outlining something we’ve recently become familiar with: a new for-profit limited liability company, temporarily referred to as “NewCo,” will be formed for (a) the PGA and DPWT to “contribute” all of their commercial businesses and rights, and (b) PIF to contribute LIV.  Those contributions will be valued so that the PGA, DPWT, and PIF can each be granted a corresponding equity membership in NewCo.

In addition to contributing these assets, PIF will be making a “cash investment” to help get the new entity off the ground and granted a right of first refusal on any future capital raised by NewCo (meaning the PIF can step into the shoes of any third-party investor and basically replace their attempted entry).

Page 2 starts to provide some more interesting new information, including that the Board of Directors for NewCo will consist of members agreeable to both the PGA and PIF (no mention of DPWT), and will include Yasir AI-Rumayyan (who will be serving as Chairman of the Board) and Jay Monahan (CEO of NewCo).

The NewCo Board will also have an Executive Committee, initially consisting of AI-Rumayyan, Monahan, PGA TOUR Policy Board Chairman Ed Herlihy, and PGA TOUR Policy Board member Jimmy Dunne.  Those last two names should be familiar; Herlihy and Dunne are both credited with being the behind-the-scenes engineers of this combination.

🚨#NEW: Tour executive vice president Tyler Dennis and chief operating officer Ron Price tell Sports Illustrated that the PGA TOUR “is fully in control of this new company (NewCo), which we tentatively are calling PGA Tour Enterprises” and added that the PIF “absolutely” wants…

— NUCLR GOLF (@NUCLRGOLF) June 28, 2023

As implied, NewCo will be the parent entity for this combined super-golf entity, and the PGA TOUR will be designated the “competition manager” for all “of the PGA TOUR’s contributed golf-related commercial businesses and investments into NewCo,” with the TOUR being granted“full decision making authority with respect to all strategic and operational matters related to competition in respect of its contributed golf-related commercial businesses and investments into NewCo.” 

Simply stated, the TOUR will be in charge of any golf competitions going forward. Some may read this and believe that LIV’s victory party is over.

Page 2 ends with a section entitled “PGA TOUR / DP World Tour and LIV to Co-Exist,” and suggests the opposite of many critics’ claims; that the three entities will work together and “determine how best to integrate team golf [i.e., LIV] into PGA TOUR and DP World Tour events going forward,” with an ultimate goal being that the TOUR, DPWT, and LIV “will cooperate in good faith and use best efforts to secure OWGR recognition for LIV events and players under OWGR’s criteria for considering LIV’s pending application.” As a result, this merger will seek to cure one of LIV’s biggest weaknesses:  the lack of recognition on the competitive stage. That said, like I previously stated, it seems that LIV will be sticking around, whether or not its called LIV and c certain adjustments are made.

Perhaps the most controversial aspect of this merger is how the LIV golfers will be able to return to the TOUR and DPWT. And while the Agreement doesn’t lay out any specifics, it does have a dedicated section to this, stating, in relevant part, that the “PIF, the PGA TOUR, and the DP World Tour will work cooperatively and in good faith to establish a fair and objective process for any players who desire to re-apply for membership with the PGA TOUR or the DP World Tour following the completion of the 2023 season and for determining fair criteria and terms of readmission consistent with each Tour’s disciplinary policies.” As we assumed, LIV golfers who wish to return may be facing some fines, but “fair and objective” suggests that the fines will be overhyped and potentially de minimis when compared to how much each golfer received for joining LIV.

🚨Dustin Johnson speaks on the merger from LIV Valderrama: “I think with this agreement, the only thing that’s going to happen is LIV is going to get even better than what it is now, which it’s already great. I’m happy exactly where I am, and I’m definitely not looking to play…

— NUCLR GOLF (@NUCLRGOLF) June 28, 2023

But perhaps most noteworthy on page 3 is the “Non-Solicitation” clause, which provides that all of the signing tours and their “other representatives,” likely meaning their respective golfers, will not “solicit, or recruit any players who are members of the other’s tour or organization to become members of their respective organizations or any other golf league or to participate in golf events hosted by any other golf league, or to terminate their membership with LIV, the PGA TOUR or the DP World Tour, as applicable.” This is likely a direct response to the rumors that have recently been flying around that prominent golfers like Jon Rahm would be joining LIV and starting his own team.

The final provision on page 3 is something we anticipated:  PIF will be getting “a high profile event for which PIF or its designee(s) will make a financial investment to serve as title sponsor…” And while I certainly don’t expect we’ll be seeing the LIV Open, it is plausible that one of the designated elevated events might be changing hands very, very soon.

Page 4 wraps up that the Agreement will only remain in force until (a) a definitive merger agreement is entered into by the parties, or (b) December 31, 2023, the latter meaning that the TOUR, DPWT, and LIV have a little less than 6 months to negotiate the intricacies, paper the entire deal, and, perhaps most difficult, get the golfers on board so they veto the entire arrangement.

While details still need to be hammered out, this sets up the boundaries for the future deal. Again, the PIF, through AI-Rumayyan, will have the lion’s share of the power by, more or less, being the exclusive financial backer of the NewCo entity going forward, in addition to being Monahan’s “boss.” And while the TOUR will have “control” over the golfing events, it is apparent that the TOUR will not be able to hide the PIF’s very direct involvement going forward.

Cover Image Via Politico