A New Era in Golf: The PGA and LIV Golf Merger Explained
David A New Era in Golf
The announcement made on June 6 by the PGA Tour commissioner “Jay Monaghan” that he would join forces with its Saudi rival LIV Golf as a new entity, made up of the PGA Tour, The DP World Tour, the PGA and LIV Golf Merger, came as a shock to many avid golf fans. Since the announcement, there have been split reactions. While some have praised the merger as a way to overcome the current litigations between the two parties, others have criticized the Saudi-backed Public Investment Fund (PIF) for using the sport to whitewash their reputation among concerns for their less than desirable human rights record.
What’s The Deal?
The agreement between the PGA and the PIF would see a complete merging of assets of the PGA Tour, the DP World Tour, and LIV Golf. Part of the statement from the PGA said:
“The parties have signed an agreement that combines PIF’s golf-related commercial businesses and rights (including LIV Golf) with the commercial businesses and rights of the PGA TOUR and DP World Tour into a new, collectively owned, for-profit entity to ensure that all stakeholders benefit from a model that delivers maximum excitement and competition among the game’s best players.”
The PGA would have full control over operations and would even have the right to close down the LIV entirely if that’s what it decided. Before any deal can go through, however, all parties must have an independent valuation of their assets and then agree on each other’s valuation. This will then go into a separate, new entity that has yet to be named. With the value of PGA being considerably higher than both LIV Golf and the DP World Tour, the PIF will be expected to buy a percentage of the new company as part of the deal, which would give the new entity a cash injection that could rejuvenate the sport and allow the top golfers around the world to compete together at the top level.
The Rift Between the PGA and LIV Golf
Since its inception in 2022, the LIV Tour has already lured some high-profile golfers away from the long-standing PGA Tour, including most notably, Phil Mickelson, which has frustrated other golfers and even created suspensions and fines from PGA and DP World Tour events for any player that plays in the LIV Tour without permission. Some golfers have been vocal about their feelings towards ditching the PGA and playing on the LIV Tour, and the likes of Tiger Woods and Rory McIlroy have reportedly turned down huge sums of cash to play there and have stayed loyal to the PGA. There have also been legal litigations between the two parties, which have involved huge legal fees on both sides, something which this agreement will put an end to. Regardless, there are many reasons you should be watching LIV Golf.
Latest Developments in the PGA/LIV Golf Merger
Speaking of McIlroy, he is among several ‘player directors’ that have been involved in a meeting to discuss the merger with famous golfers Peter Malnati, Patrick Cantlay, Webb Simpson, and Charlie Hoffman also having an input. The Tour Commissioner, Jay Monaghan, was on medical leave and did not attend but instead sent two representatives to the meeting in his absence, Chief Operating Officer Ron Price and Chief of Operations Tyler Dennis. The meeting was held in Dearborn, Michigan, and went on for 5 hours. By some accounts, it got very heated at times, as you would expect from a meeting that could and probably would change the face of golf as we know it forever.
Finer Details of the PGA/LIV Golf Merger
The framework for the new venture has been laid out in a document that is now doing the rounds on Twitter. It states that the new firm referred to as ‘NewCo’ in the documents but will have a different name as things develop further, will be a for-profit LLC. It says that the PGA Tour will be named as competition manager for NewCo and will have full decision-making control over strategic and operational matters and Winner PGA Payout. The PGA Tour will also “retain its current level of regulatory oversight of the game of golf in respect to the assets contributed to the PGA Tour (e.g., sanctioning of events, setting of competition rules, and managing inside the ropes).” The framework also suggests they will be making a good faith assessment of the benefits of team golf in general and also ways to help the LIV gain OWGR status, something which it is already in the process of applying for.
Will the PGA/LIV Merger Be Tax Exempt?
At the moment, the PGA Tour enjoys tax exemption status under tax code 501(c)(6). The section in question relates to:
“Business leagues, chambers of commerce, real-estate boards, boards of trade, or professional football leagues (whether or not administering a pension fund for football players), not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual.”
Basically, The PGA and LIV Golf Merger is considered in the same regard as a real-estate board or a chamber of commerce. This means that as things currently stand, the Saudi Arabian-backed PIF wouldn’t have to pay any taxes.
News of the newly formed partnership has got politicians talking, however, and a new bill has been proposed by Rep. John Garamendi (D-CA), which would ensure that companies like this and other sports leagues such as the NHL would no longer receive tax exemption status. The new bill dubbed “No Corporate Tax Exemption for Professional Sports Act” would stop any professional sports league from filing their taxes under the 501(c)(6) code.
Much of the wider PGA Tour community has been left feeling ‘in the dark’ about the merger, with the sudden announcement leaving more questions than answers. One thing we do know is that money talks and given the deadline of the end of 2023 to get the finer details ironed out and PGA Payout, you can expect to see many more developments to the plans in the coming months.
