Golf merger: Market triumphs over pretentious morality

In the middle of its biggest metamorphosis since Arnold Palmer inspired the creation of the PGA TOUR, Monahan and his crew are hard pressed to explain their unexpected bonds with the Public Investment Fund (PIF) of Saudi Arabia.

After calling out the blood-stained Saudi investments in the sport as a disgraceful effort at sportswashing, the PGA TOUR did an inexplicable U-Turn by agreeing to combine forces with the PIF. The golf world called LIV Golf immoral, and termed its architects inhumane and brutal, lacking in legitimacy.

Late on Tuesday, their pretense of principles made way for the pursuit of profit. Monahan sat down with Yasir Al-Rumayyan, gleeful about a framework agreement between PIF, PGA TOUR and the European Tour. The union will spawn a baby, a for profit LLC that seeks to control professional golf. The arrangement is loaded with irony.

Over the past few years, the PGA TOUR held up an umbrella of convenient terms to protect its power and turf. Its leadership, aided by some marquee golfers, took umbrage under the garb of morals, legacy, 911 families, and human right violations. But the resistance only lasted till the money was finally enticing enough for them to get into bed with the PIF. The turn of events was shocking, especially considering that the PGA TOUR claims to be a body of the players. Unfortunately, none of them, including Rory McIlroy or Tiger Woods, were even consulted before the decision to move in with the Saudi suitors.

The idea of a breakaway league of superstars hung in the air for almost a decade, before it finally took the shape of LIV Golf in 2021. LIV threw unheard of millions to lure players into its fold and offered a fat purse of $4 million to each of its winners. The news was met with disdain. Phil Mickelson, the first big signatory to the league, was demonised for joining forces. The media sought to diminish his legacy and tarnish his reputation, for selling out to LIV Golf. Golf Channel, the main broadcast partner of the PGA TOUR went ballistic in its criticism of the players associated with the league and its CEO, Greg Norman. As much as the mainstream drivers desired for LIV Golf to sink and surrender, they could only watch in horror as the 54-hole festival toured the world, playing on some reputed courses in Asia, Europe, and the USA. Adelaide in Australia though produced LIV’s biggest punch, drawing an estimated 75000 fans to an event soaked in beer and cheer. Apparently, it emboldened PIF, and sent shivers down the spine of the main Tours. The noise from Adelaide offered a resounding echo of the appetite for an alternative form of golf, and market acceptance. It was hard to ignore the message. As it is the PIF has been actively investing in sport — millions of dollars have chased football, formula one and now golf. The PIF is reported to have spent in excess of $2 billion since the inception of LIV Golf, underlining its serious intent and ability to successfully organise golf. Even though a lot of the money was burnt capital, it produced a steady stream of events, with the franchises beginning to gain recognition and fans. Meanwhile, the efforts by the PGA TOUR to develop a calendar of elite events drew criticism for meekly copying the LIV model. But doing so needed money, and a lot of it came out of precious reserves. As soon as the Tours realised that PIF will continue to back LIV despite the deep losses, it was evident that they could not compete on level terms.

The presence of Brooks Koepka, Cameron Smith, Phil Mickelson, Dustin Johnson, Bryson DeChambeau and Patrick Reed made it hard to argue that LIV was just a circus of washed out golfers. LIV golfers densified the plot with a strong showing in the Masters and Koepka drove the wedge deeper with his victory in the PGA Championship. It was increasingly evident that efforts to brush aside LIV were nothing more than a lame burst of wishful thinking that ignored the realities of the sport as well as the latent demand for an innovative approach to the sport. Shotgun starts, team competition embedded into an individual contest, and franchise identities were gaining the attention and interest of spectators around the world.

Sponsors are key stakeholders in sport. Their money and involvement is central to the conduct and success of any sport, increasingly so in a world driven by digital power and shrinking physical distance. As LIV continued to produce winners, the noise on the street was bound to rattle the windows of the many sponsors with entrenched investments on the PGA TOUR. Diversification can be a smart business strategy, and it was just a matter of time.

As reported in the Daily Mail, conversations were afoot as early as December last year. After calling LIV, ‘dead in the water,’ McIlroy was learning that wasn’t the case after all. PIF drew from the experience of Amanda Staveley to engage with McIlroy and inform his views. The two are believed to have met before Christmas last year, where the Newcastle chieftain shared information about the Al-Rumayyan’s vision for golf and their willingness to continue investing resources to achieve it. McIlroy’s changed views and toned-down reflections this year can be attributed to some of these interactions. Staveley also attended the Masters in April to influence the power brokers of the golf world.

There are also reports in the social media that investigations related to the legal cases between the PGA TOUR and LIV Golf may have hastened a truce. As a not-for-profit entity the American tour has benefited from many decades of tax exemptions, some believe that opening their books may have caused some heartburn. Another factor considered significant is a potentially imminent departure of Jon Rahm to LIV Golf. Reports suggest that he was in advanced negotiations for a move that could have triggered a domino effect. The new league is supposed to have some head room besides all the money. The possibility of extending the competition to 14 teams provides LIV eight more spots besides the possibility of dropping some of the lesser-known names to accommodate the established professionals.

While Monahan played an important role in keeping his flock together through a turbulent time, the combination of incentives and punishments could only stretch that far. The writing was on the wall. Some sponsors were curious about making investments into the franchise model of LIV, while others were inching ever closer to the exit door from their long-held investments on the PGA TOUR. Honda, for example, decided to terminate its title sponsorship of the Honda Classic in 2023.

The PIF struggled to bring sponsors for LIV, but these investments were aligned with the Vision 2030 project of Mohammed Bin Salman, and Al-Rumayyan had the ear of the crown prince. The latter has emerged as an important pillar in the vision for Saudi Arabia’s future. He is the chairperson of Aramco, with 2022 profits of $144 billion, the chief of PIF with an estimated corpus of $650 billion. And now, he shall be the boss of professional golf outside the majors. Al-Rumayyan will steer the ship as chairperson of the combined entity, with Monahan merely his bureaucrat as CEO. Concerns abound the merger, Brandel Chamblee suggesting that the competition commission might strike it down. But PGA TOUR board members Jimmy Dunne, an investment banker and Ed Helrihy, a leading M&A lawyer were key to this arrangement. The two men have enormous deal making experience and were among the small group of individuals aware of these plans before they were announced on Tuesday. Surely, they must have considered these challenges before arriving at this significant decision for the entities involved.

The pivots of this arrangement are clear. LIV was struggling to find sponsors, a network audience and a pathway to profit. The PGA TOUR faced an existential threat with depleting interest and a divided house of golfers. The steady flow of events, the performances of golfers on the LIV league, and Koepka’s resounding victory in the PGA Championship eroded a lot of their qualitative arguments. Any possibility of Rahm jumping ship could have proven suicidal for the TOUR. Joining forces was a win-win arrangement, in response to a market that was relatively numb to shallow morality and evidently warm to fresh ideas of golf and an innovative format. Now, the PGA TOUR can stop bleeding money, and plan a reliable schedule of events. LIV and/or PIF can tap into sponsors, co-sanction global events and gain visibility through mainstream media arrangements.

The market and money prevailed yet again over pretentious morality. Money trumped politics in this intriguing battle for power.