(Dearborn, Mich.) The PGA Board of Directors, meeting Tuesday for the first time since a merger agreement negotiated with Saudi Arabia’s sovereign wealth fund, signaled its intention to proceed with the tentative agreement despite the outcry rising in clubs across the United States and even on Capitol Hill.
But he also made it clear that we are still far from a contract.
As expected, the council did not vote on the text – a non-binding draft – which provides for the consolidation of the PGA, European and LIV Golf (Saudi Arabia-backed) tours. The new company would be run day-to-day by the PGA – for now – albeit funded by abundant Saudi capital. The board won’t vote on the pact until final terms are negotiated, but PGA executives hoped the meeting would at least bring some stability to the Tour’s business, which is heading into a troubled period marked by internal divisions and a global scrutiny.
This turmoil could last for months, PGA directors and officers believe.
The PGA issued a statement worded in cautious and non-binding terms.
The PGA is trying not to further alienate the players, some of whom are furious to have learned of the pact from the newspapers: “We are committed to the guarantees in the framework agreement that ensure that the PGA will run this potential entity commercial and will retain control of it,” the PGA said.
The board meeting came three weeks after the surprise announcement of the deal and a day after the circuit gave the Senate a copy of the five-page tentative agreement. The framework agreement, signed in the early hours of May 30 at a hotel in San Francisco, came after seven weeks of secret negotiations. But it is remarkable for the few binding commitments it contains and for the many important elements that remain to be settled.
Thus, the PGA and the Saudi fund that controls LIV must transfer their activities to the new company. Except that the negotiators signed so quickly that no evaluation of the assets of each is included in the agreement. It is unclear if this assessment was even made. The agreement presents a draft organizational chart of the new company, but does not quantify the sum to be injected by the Saudi fund.
Among the few binding clauses was a non-disparagement agreement binding the PGA and the Saudis (but not the players) and a truce preventing each tour from poaching golfers from the other. No termination penalty is foreseen: if the agreement is not ratified within a year, the two circuits resume their activities as before.
Even if a definitive contract is signed, the merger could fail. The Justice Department’s antitrust section is studying the deal and may try to block it. The deal will also be scrutinized July 11 on Capitol Hill, where a Senate subcommittee has convened hearings.
That said, Tuesday’s meeting was crucial for the PGA and its 11-member Board of Directors, including 5 players and leading figures from business, law and finance.
Tuesday’s meeting, at a hotel in Dearborn, near Detroit, began in the early afternoon and continued into the evening. A person familiar with the meeting, who spoke on condition of anonymity, said the deal with the Saudis was not the only topic on the agenda. Time was spent on technical matters of the sport, such as eliminations after 36 holes and tournament eligibility.
But the bulk of the meeting was devoted to the tentative agreement, with Tour bankers explaining how they intend to assign value to the various PGA assets. Commissioner Jay Monahan did not attend the meeting. On June 13, the PGA announced that he was going on leave to recover from an unspecified “medical situation”.
None of the council members made a statement after the meeting, leaving all the room for the press release. Only one player on the board, Rory McIlroy, had previously expressed some support for the deal. Other players had indicated they wanted to know more about the deal and what it would mean for the circuit.
But the board had been told in recent months that the PGA could not afford to continue its duel with LIV. This circuit financed with billions by the Saudi fund has attracted some of the biggest stars of golf with guaranteed contracts and huge purses. On the other hand, the Saudi sovereign wealth fund was also under pressure: it suffered setbacks in court against the PGA and LIV is struggling to attract American audiences, for reasons that add to the origins of its funder.
However, if the deal fails, both sides have already won something: an end to litigation in California, as the PGA and LIV have agreed to drop a civil lawsuit between them. The lawsuits have been settled without the possibility of reviving them even if the proposed merger disintegrates.
It’s still a given: Because as cautious as the PGA’s statement was on Tuesday night, the drop of charges was announced in the very first sentence.
