Jay Monahan predictably vague when describing possible agreement with PIF
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ATLANTA – A framework agreement that was negotiated behind closed doors has transitioned to negotiations for a possible definitive agreement that’s also being forged in relative secrecy, although PGA Tour commissioner Jay Monahan explained those negotiations are progressing with an “intensity” and “urgency.”
What exactly a potential definitive agreement would look like is anyone’s guess, and when pressed about the ongoing negotiations on Tuesday at the circuit’s season finale at East Lake, Monahan was predictably vague.
But it wasn’t what the commissioner said so much as how he said it, that prompted a collective double-take.
“In terms of the PGA Tour leading our sport forward, when you go back to our framework agreement, we have put an end to the divisive and distracting litigation, we have safeguards that are in place to put the PGA Tour in a position to control our future, and as I sit here today, I am confident that we will reach an agreement that achieves a positive outcome for the PGA Tour and our fans,” Monahan said. “I see it and I’m certain of it.”
Full-field tee times from the Tour Championship
The commissioner dropped “positive outcome” or something of the kind 11 times during his hour-long press conference. But as talking points go, a “positive outcome” doesn’t necessarily mean a definitive agreement.
The five-page framework agreement dictates that all parties – the Tour, Saudi Arabia’s Public Investment Fund and the DP World Tour – must negotiate toward a definitive agreement in good faith, and Monahan was careful to stay in line.
“If you saw the amount of conversation and the time that the PGA Tour, DP World Tour and PIF are spending working forward from a framework to a definitive, I think you would see the sincerity of the efforts there,” he said.
The Tour’s good faith negotiations are being led by Ron Price, the circuit’s chief operating officer, and president Tyler Dennis, who said the talks have been “very positive and collaborative in nature,” and there’s no reason to believe that both sides aren’t motivated to reach some sort of deal. But a Dec. 31 deadline and a complete lack of details has led many to contemplate no formal agreement.
There’s an alternate universe where the framework agreement announced on June 6 was entirely driven by the Tour’s and PIF’s desires to end the costly and contentious litigation that had pinwheeled into at least a half-dozen U.S. District Courts.
For the Tour, the legal fees mounted to more than $50 million last year. Along with dramatically increased purses for this season’s designated (now signature) events, the drain on the circuit’s reserves had reached critical levels, making the lawsuits’ dismissal with prejudice a win worth celebrating.
For the PIF, rulings in the Northern District of California’s U.S. District Court had potentially exposed the fund to U.S. law and endangered all of Saudi Arabia’s investments in the United States, including a $3.5 billion stake in Uber.
In this world, the Tour would also be well-positioned going forward, even without the infusion of cash from the PIF. By creating PGA Tour Enterprises – the Tour’s for-profit assets which would, in theory, become a part of a larger company, including the DP World Tour and LIV Golf if a definitive agreement is reached – the circuit has opened the door to all manner of investments, not just from the PIF.
“Right now, my focus is on the negotiations with PIF and that’s where all my energy and attention is,” said Monahan, when asked if there were investment options beyond PIF. “But I think given the amount of attention that our framework agreement has received and in particular the fact that we’ve created a NewCo, PGA Tour Enterprises – I think the realization that there is an entity that can be invested into at the PGA Tour and the uniqueness of being able to invest into a professional sports league of the caliber, quality and sustainability of the PGA Tour, obviously has generated a lot of interest.”
Consider that the circuit already has an investment bank, Allen and Company, carrying out valuation analysis of the assets of LIV Golf and the Tour, and last month, Monahan named Colin Neville, a partner with The Raine Group, a special advisor to the six player directors on the Tour’s policy board. Neville leads Raine’s sports practice, overseeing its principal investing.
If a cash infusion was the Tour’s ultimate goal, a pro-forma negotiation with the PIF, followed by a more inclusive examination of the circuit’s assets and potential investment interest beyond Saudi Arabia, wouldn’t be an outlandish curveball considering the sea change the Tour embraced on June 6.
This option comes with its own set of concerns, primarily the idea that a private investor would want a relatively quick return on its investment compared to the PIF’s long-term goals in golf. The PIF and its governor, Yasir Al-Rumayyan, wanted a seat at the table and he played an impressive and well-financed hand to get there. It’s unclear if private equity would be willing to play a similar long game.
There’s nothing that Monahan said Tuesday to suggest there will be no definitive agreement, but he certainly offered a subtle alternative with his promise of a “positive outcome.”
“I can see it,” Monahan offered with a healthy amount of conviction.
There’s no question that the commissioner can envision a future for his tour that will leave behind the contentiousness and uncertainty of the last 18 months. What’s not so clear, is what that future looks like.
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