The Four Days That Relaunched Golf’s Civil War | Mint

The Four Days That Relaunched Golf’s Civil War

Golfers celebrated on stage after the LIV Golf Invitational Miami event in October.
Golfers celebrated on stage after the LIV Golf Invitational Miami event in October.

Summary

Jon Rahm’s defection to the Saudi-backed LIV Golf was quickly followed by the PGA Tour aligning with other powerful investors as the strategy for both sides takes shape ahead of a deadline to make a deal—or risk becoming enemies again.

Jon Rahm was hardly the first headline name that the Saudi-backed LIV Golf tried to lure away from the PGA Tour. He wasn’t even the first reigning major champion. But the pursuit of the 29-year-old Spaniard ranked as the most extraordinary of its attempts so far for one reason: its stunning timing.

At the very same moment that LIV was trying to poach Rahm, the Saudi sovereign-wealth fund that has poured billions into the upstart circuit was entering what were supposed to be the final weeks of negotiations with the PGA Tour to agree to terms on a joint venture that would end the bitter feud that had threatened to tear golf apart.

The way the deal wrapped up on Thursday was even more jarring: On the same day that LIV made Rahm’s signing public, the PGA Tour received a final round of bids from outside U.S. investors who are also seeking to buy into the Tour. Just three days later, the Tour picked a group of those suitors to move forward with, and they amounted to a who’s who of billionaires from the world of sports.

That all of this happened ahead of a key meeting between PGA Tour commissioner Jay Monahan and Saudi Public Investment Fund governor Yasir Al-Rumayyan set for early this week added even more intrigue to the maneuvering on both sides.

The PGA Tour and the Saudis have been an odd couple ever since they agreed to align in June after spending a year as bitter enemies. The whiplash of the last few days has made their dalliance seem even stranger.

Even as they continue to work toward a rapidly approaching deadline to join forces—which both sides say they still want to do—the PGA Tour and the Saudis are re-arming themselves in an effort to gain last-second negotiating leverage, and possibly battle each other again. They’re like a couple interviewing prospective divorce lawyers right as their wedding date draws closer: publicly committed to tying the knot while privately preparing for the prospect that things may not work out.

That seems to have been the driving force behind LIV’s deal for Rahm. The world No. 3’s decision to join LIV was fairly straightforward: the circuit had grown, the wider landscape was shifting, and ultimately he received an offer that was too good to turn down, he said.

The thinking on the Saudi end felt more mystifying. When the Tour and PIF shocked the golf world with an out-of-nowhere announcement that they would drop litigation against each other in June, it left LIV headed toward potential irrelevance. That made the decision to dole out nine figures to sign a big name like Rahm all the more confusing. Why would the Saudis continue to splurge on a side show when they were on the cusp of partnering with the biggest golf circuit in the world?

The answer was two-pronged, say people familiar with the Saudis’ thinking. First, the Saudis wanted to make it clear that they wouldn’t allow themselves to be elbowed out of the negotiations while the PGA Tour courted other outside investment. Rahm was the perfect choice to drive home their point: Try ignoring us now—we can continue to pick off your best players.

Then came the Tour counterpunch. In a memo sent Sunday, its board said it was moving forward in negotiations with a consortium of U.S.-based investors, led by Boston Red Sox and Liverpool owner Fenway Sports Group, and also including New York Mets owner and hedge fund titan Steve Cohen, Atlanta Falcons owner and Home Depot co-founder Arthur Blank, and Redbird Capital managing partner Gerry Cardinale, among others.

The memo also said that the board still envisages “advancing our negotiations with PIF in the weeks to come." But it wasn’t hard to read between the lines. The consortium represented a list of deep-pocketed power players, a signal that even if the Tour doesn’t end up doing a deal with PIF, it has at hand a long list of rainmakers lining up to work with them.

That exact scenario explains the Saudis’ second goal in signing Rahm. LIV and the Public Investment Fund have also been bracing for a downside outcome, people familiar with their thinking said. They began to consider poaching another player from the PGA Tour as a sort of insurance policy, something that could strengthen LIV in case the two sides failed to come to a deal and resumed their rivalry.

This time, LIV had a wider selection of Tour pros to choose from. In the months since the Tour and the Saudi PIF announced plans to merge, a number of angry Tour players had reached out to LIV, many openly upset over being blindsided by the planned tie-up. Some of them were known to have previously turned down life-changing offers from the Saudis. Now so many of them were prepared to entertain offers from LIV that, according to one person familiar with LIV’s thinking, it far exceeded the number the 48-man circuit could possibly take on.

Rahm—a fan-favorite from Spain who was undeniably one of the best golfers on the planet—emerged as an easy choice.

The PGA Tour heard the Saudi message as it was intended—even if some people in that camp also saw it as a bluff. They were privately dismissive of the idea that Rahm could prop up LIV if the two sides failed to finalize their agreement. One more star player, they reasoned, wouldn’t change the fact that LIV was still broadcasting to small audiences on the CW Network.

The Tour also believed it didn’t need the Saudis and or to succumb to any pressure. The bid from the consortium called Strategic Sports Group, which also includes billionaire hedge-fund manager Marc Lasry, was all the proof they needed. In some ways, those U.S. investors represent the Tour’s own insurance policy.

Early this week Monahan and Al-Rumayyan are expected to talk with each other about a deal structure, the role of third-party capital, the amount PIF is putting in, and how governance will work—all while the Tour moves ahead in its negotiations with the U.S. investors.

Already, the Saudis believe they stacked their deck. Rahm’s signing has renewed the urgency on the Tour’s part in scheduling and finalizing meetings, according to people familiar with the Saudis’ thinking. They also thought it less likely than ever that the Tour would shutter LIV, or that the Saudis would agree to it.

There’s still one more player at the table in all of this, however. The PGA Tour golfers themselves have to approve any deal and are guaranteed a prominent seat next to management, through their board members.

For now, the players are keeping their cards close to their chests. Those involved in the negotiations view LIV’s move for Rahm as a sideshow that may not matter much in the end, said a person familiar with their thinking. They’re focused on getting the best deal for all of their members—with whatever party or parties that turns out to be—and their demands include equity in the new venture.

That constituency includes the likes of Tiger Woods. But it no longer includes Jon Rahm.

Write to Louise Radnofsky at louise.radnofsky@wsj.com, Andrew Beaton at andrew.beaton@wsj.com and Cara Lombardo at cara.lombardo@wsj.com

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