(Bloomberg) -- PGA Tour and LIV Golf have been at each other’s throats in public for years. But in recent weeks, leaders of the rival golf circuits had been hard at work in secret on a detente.
Yasir Al Rumayyan, the golf-crazy chairman of Saudi Arabia’s Public Investment Fund that is LIV’s biggest backer, jetted around the world for several rounds of discussions with top officials from the PGA Tour about a possible combination, according to people familiar with the matter. On Tuesday, his efforts paid off: PGA Tour and LIV announced that they would merge, ending their pitched battle with a shocking truce.
The transaction will create a global golf superpower and bring to an end all outstanding litigation between the two sides. This account of how the deal came together is based on details from multiple people familiar with the discussions, all of whom asked not to be identified discussing private information.
PGA board members Ed Herlihy and Jimmy Dunne initially met with Rumayyan and his associates in London at the end of April, where they talked extensively for the first time about a potential tie-up. A couple of weeks later, the discussions moved to Venice, where Herlihy introduced PGA Tour Commissioner Jay Monahan to Rumayyan. The pair hadn’t previously met in person, one of the people said.
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After a final round of meetings at the Four Seasons Hotel and at offices in San Francisco, the deal was signed over the US Memorial Day weekend late last month, one of the people said. It came amid a nearly yearlong legal battle between the two entities that threatened the future of the professional golf industry globally and raised geopolitical concerns.
News of the pact jolted many people close to the sport, with players indicating on social media that they were upset that they had been left in the dark. When some of the sport’s biggest names defected to LIV, lured by large signing bonuses, it created rifts between players and divided the loyalties of fans. At least some of the PGA Tour’s many corporate partners weren’t notified before the LIV deal was announced publicly, according to people familiar with the matter.
Also blindsided were US officials who have watched warily as Saudi Arabia has sought to expand its influence and burnish its international reputation by investing in sports. Senator Chris Murphy, a Democrat from Connecticut, expressed surprise at the announcement, tweeting that PGA officials had recently told him that Saudi Arabia’s human-rights record “should disqualify them from having a stake in a major American sport.”
The deal talks were kept to a tight circle of senior officials, with relatively few advisers. Precise financial details of the accord haven’t been disclosed, though PIF plans to pump billions of dollars into the new entity, the people said. The two sides moved quickly to seal an agreement once it was clear that both sides were favorably disposed to a deal, agreeing to figure out the finer points in later talks.
That leaves plenty for advisers to thrash out over the next few weeks, including assigning valuations to the assets, which also include the European golf circuit known as the DP World Tour. Exact numbers might not be finalized until later this summer, one of the people said.
In the room are likely to be PIF’s advisers — veteran dealmaker Michael Klein and PCP Capital Partners’s Amanda Staveley — as well as bankers from media boutique Allen & Co., which the PGA is talking to about helping with the valuation analysis. Klein, one of the most high-profile investment bankers globally, has cemented his position as one of the most trusted advisers to the wealth fund when it comes to some of its ambitious transactions.
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Rumayyan was able to persuade PGA Tour officials that it was in the interest of all parties to join forces, rather than competing, one of the people said. While LIV has spent freely to lure top players like Phil Mickelson and used splashy promotional tactics to attract fans, it has also claimed in court filings that it has struggled to strike lucrative broadcast TV and sponsorship deals. PGA Tour, meanwhile, has been grappling with how to appeal to a new generation of viewers as its traditional audience ages.
Saudi Arabia has been increasingly turning to sports as a way to shed its reputation as a petrostate that has little in common with other developed economies. PIF poured an additional $2 billion into LIV Golf in May, on top of an initial investment of about $1 billion. It also has lured international soccer stars such as Cristiano Ronaldo and Karim Benzema to play in the Kingdom, and is pushing into tennis, cricket and auto racing.
A passionate golfer, Rumayyan is one of the most powerful financial professionals in the world. In addition to his role at PIF, he is chairman of Saudi Aramco and the English Premier League’s Newcastle United Football Club, another one of PIF’s high-profile sports investments. He will serve as chairman of the combined PGA-LIV.
--With assistance from Matt Townsend, Joe Deaux, Ryan Beene and David Hellier.
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