PONTE VEDRA BEACH, Fla. – A bombshell announcement Tuesday in the golf world has shaken up the sport.
The PGA Tour, DP World Tour and LIV Golf will be merging to create a commercial operation with the Saudi Arabian Public Investment Fund and European Tour. PGA Tour commissioner Jay Monahan and PIF governor Yasir Al Rumayyan spoke to CNBC’s David Faber to talk about the merger and the creation of a soon-to-be-named for-profit company.
“I think today is a historical day for the PGA Tour in the game of golf,” Monahan said during the CNBC special, “And it’s a historical day for the PIF and the DP World Tour.”
As part of the merger, the PGA Tour and LIV Golf will be dropping all lawsuits between the two leagues. Over the past two years since LIV Golf began, both leagues and pro golfers have been stuck in a divisive legal battle. In which Monahan has vehemently opposed LIV Golf and continuously said any pro golfer who decided to play for Saudi Arabian golf league would not be allowed to play in any PGA Tour sanctioned events.
“There’s been a lot of tension in our sport over the last couple of years, Monahan said. “But what we’re talking about today is coming together to unify the game of golf and to do so under one umbrella.”
Now all three tours will operate under a for-profit LLC that the PIF will invest in with the DP World Tour, though each tour will still be independent of one another.
“The idea that we have instead of competing, we will be complimenting and to look for additional venues,” Rumayyan said during the CNBC special. “That’s where the PIF investments, capital investments will come in. So we will be either creating or acquiring, doing some new things to grow the game of golf.”
The “new things” mentioned are in regard to new investors, events, courses, technology and new initiatives. Monahan said the intent of the merger is to promote the sport and expand the game. Rumayyan confirmed the PIF is intending to invest billions of dollars.
“We’ve recognized that together, we can have a far greater impact on this game than we can working apart,” Monahan said. “I give Yasir great credit for coming to the table, coming to the 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.”
“We will have both LIV and the PGA tour in addition to all of our assets,” Rumayyan said. “We will be investing in the growth of the game of golf and doing many new things that I think we’ll have a better engagement from the players, the fans, the broadcasters, the sponsors, everyone else, and hopefully to even give a better access for more and more people to the game of golf. The way we would love to make the game of golf very much accessible. That’s what we don’t have right now and today.”
We now know how the initial merger talks started. A PGA Tour board member called Rumayyan and asked to meet in London to have a discussion. The two leagues also met in Venice, San Francisco and New York to continue discussing the merger.
“Had we met two or three years ago, the impact that we will have in the game of golf would be lesser,” Rumayyan said. “It would be something small, but the way we’re doing our partnership it’s going to be really big.”
Even though the merged company will be for-profit, the PGA Tour will still operate as a tax-exempt non-profit 501(c)6 organization.
“At the 501(c)6 level you take the assets of the PGA Tour, the PIF’s assets with LIV and the Asian Tour and the DP World Tour, take all those commercial assets drop them down into that for-profit LLC,” Monahan said. “This is early. We’re going to go through a valuation of all of the businesses. The PIF will invest in NUCO.”
Monahan continued, “We’ve been somewhat handicapped in that as the 501(c)6 we are a pass through organization. Now to have this for-profit LLC, to have the PIF and Yasir investing in it, for him to serve on our board, serve as chair of the board of NUCO puts us in a position where we can go out and we can address some opportunities in the market.”
Right now, there is no definite agreement between the three tours. Rumayyan said there is a framework in place, but in order for a definite agreement to be made, there needs to be a valuation first. Then a board of directors will be formed with the majority of board members representing the PGA Tour. Monahan will be the CEO and Rumayyan will be the chairman. Rumayyan said even though the PIF will most likely invest more money into the new company, the PGA Tour will still control the governance.
“With us restructuring our business and being in a position to utilize the power of the PGA Tour brand, use the power of our scale alongside a great partner and a great investor,” Monahan said. “That’s what’s gotten us. That’s what should be most exciting for people.”
Rumayyan said the expectation is to consolidate all golf leagues into one global golfing entity. “The potential there is really big. If you look at the size of golf monetary wise, it’s about %100 billion today. I think the growth is there. I think working together we can have a faster growth rate than the way it was for the past 10 or 20 years.”
A main point during the CNBC interview was the emphasis on growing the game around the world, but especially here in the U.S. and to attract younger people to start playing golf.
“When you look at the game on a global basis, there are now more people playing the game outside the U.S. than playing inside the United States,” Monahan said. “You look at everything that has transpired in terms of the forms of distribution — Top Golf and all the other ways that people can interface with our sport. There are now more off-course participants than on-course participants. That combined audience in the U.S. is 48% under the age of 35.
“Reaching a younger demographic at a time when the sport has never been more popular and doing so by coming together to collaborate at this point in time. That’s where we see the commonality and purpose. And that’s where we see this huge opportunity.”
Monahan continued, “When they see the impact that we’re having on this game together, there will be a lot of smiles on people’s faces and there will be a lot more people playing this game all over the world,” Monahan said. “If you’re a young player that wants to get to the highest level of the game today, you’ll be more inspired than you’ve ever been before.”