When the Saudi Arabian-backed LIV Golf Series announced an agreement to join the PGA Tour on Tuesday, it shocked dealmakers across the sporting world.
“It was a mix of bewilderment and disbelief,” Alex Michael, director of investment bank LionTree, told DealBook of the general reaction.
Industry insiders soon began to wonder which sport might be next.
Saudi Arabia’s huge sovereign wealth fund, known as the Public Investment Fund, or PIF, has a penchant for sports. It has invested in WWE, Formula 1 and a national football league (for which the country has created a huge war chest to attract big stars like Lionel Messi, who turned down an offer this week).
But the kingdom’s history of human rights violations has posed an obstacle to some deals in the United States. In 2019, the entertainment giant Endeavor repaid the fund’s $400 million investment following the murder of Washington Post columnist Jamal Khashoggi. And until recently, the PGA Tour was keen to use Saudi Arabia’s record against it.
That moral concern seems to have been drowned out by the PGA Tour’s business concerns. The deal with LIV Golf came about after the rival circuit gained traction and lured players away with high purses, ultimately making it unfeasible for the PGA to compete.
“The Saudis haven’t changed history or who they were,” said Lyle Ayes, CEO of Verance Capital, which invests in sports. “The deal just made sense.”
The deal is effectively a commercial partnership and could open the door for more sports companies to accept PIF funds, Ayes said. (Critics would say this was primarily one of Saudi Arabia’s goals in pursuing sports investment.)
It would be difficult to perform the LIV Golf playbook in any other sport. Baseball faces challenges that would make investing in a rival league risky: The fan base is aging, the regional sports model is collapsing, and there aren’t many free baseball stadiums large enough to hold a major league team. A National Football League rival would need a large number of players, and previous attempts to create competitive leagues have failed.
The National Basketball Association is perhaps the easiest team league to challenge. Basketball requires fewer players than baseball or football, and courts are fairly easy to find or build. But given how much American players are already paid, it’s unclear what a rival league could offer.
Tennis is probably the best candidate for a rival tour. Like golf, it is an individual sport, which makes it easier for PIF to lure athletes with big checks. And while there’s a smaller cohort of stars to recruit than golf, a rival league would only need a dozen players for an elite tour. Several tennis stars, including fifth-seeded Stefanos Tsitsipas, have already played in Saudi Arabia at the Diriyah tennis exhibition. The threat of Saudi competition is likely one of the reasons why the WTA has been raising money from private equity firm CVC Capital this year.
Not all options include poaching athletes. Insiders say they expect the Saudis to invest in American sports teams. The NBA has already changed its rules to allow it. And while the NFL doesn’t allow institutional investors, many expect that to change soon, too.
And while the path seemed unavailable a few years ago, now the most efficient route for PIF to own a major sports series like the PGA Tour is to simply acquire one.
“It would certainly be easier to get through the front door,” said LionTree’s Michael.
“If the PGA had said from the start, ‘Hey, you can value us at a huge premium over what we think we’re worth and give us $3 billion,’ we never would have had LIV Golf.” —Lauren Hirsch
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The far reach of Saudi money
For decades, Saudi Arabia’s sovereign wealth fund — a state investment vehicle that invests in a range of assets, including stocks and private companies — has been a quiet investor, less well known than that of other Persian Gulf states and Singapore.
And then Mohammed bin Salman came to power as the de facto ruler of the kingdom in 2015.
Since then, the sovereign fund, the Public Investment Fund, has become the engine of Prince Mohammed’s massive efforts to move Saudi Arabia’s economy away from oil. In a key part of that campaign, Vision 2030, the state fund has poured billions of dollars into foreign companies and has become one of the most notable investors in the world.
The Public Investment Fund has taken billion-dollar stakes in Uber and electric car maker Lucid; made a $45 billion bet on the Vision Fund, the hugely ambitious tech investment vehicle created by SoftBank; and invested $20 billion in a Blackstone-led infrastructure fund.
Here’s how PIF’s dealmaking efforts have spread around the world, including the stakes it’s taken as a limited partner in investment firms.
Person in the news: Yasir al-Rumayyan
LIV Golf’s deal with the PGA Tour could give Saudi Arabia a new prominence in professional sports. It could also bring new prominence to the kingdom’s foremost man in all types of investment: Yasir al-Rumayyan, the golf and cigar-loving governor of PIF
A sudden rise to prominence. For much of his career, 53-year-old al-Rumayyan has operated far from the world stage. He graduated from King Faisal University and worked his way up through the ranks of Saudi brokerage firms and the authority on the kingdom’s financial markets. His ascent coincided with the rise of Prince Mohammed, who appointed him to lead PIF in 2015
Under al-Rumayyan, PIF began to expand its financial power globally, including in the world of sports. And al-Rumayyan’s central role in Saudi Arabia’s economic campaign is bolstered by his dual role as chairman of Saudi Aramco, the kingdom’s oil giant and source of its vast wealth. Under him, the fossil fuel producer began trading in the world’s largest IPO, which now has a $2 trillion market cap.
But that new fame threatens to put al-Rumayyan in difficult positions: The PGA Tour’s bitter legal battle with LIV could have forced the Saudi financier to testify, exposing the inner workings of PIF and the true power he wields within it. That threat appears to have diminished — at least, as long as the deal goes through.
Ultimately, however, al-Rumayyan still has to answer to his powerful client. Prince Mohammed has insisted that Saudi Arabia will become a technology-enabled society of the future, bolstered by its global deals and staggeringly expensive investments in internal infrastructure projects. The fund has also sought to counter reports that its investments are the product of free decision making and are not necessarily tied to traditional structures such as investment committees.
Last year, in the PIF’s only public disclosure to date, it said it had achieved a 25 percent return in 2021. But if its massive investment campaign doesn’t pay off, it will likely be al-Rumayyan who will have to foot the bill.
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