After LIV Golf, What Will Be the Next Saudi Sports Bet?

The Saudi Arabia-backed LIV Golf Series shocked businesspeople across the sports world on Tuesday when it announced an agreement to join the PGA Tour.

“It’s been a mix of stunned and disbelieving,” Alex Michael, managing director of investment bank Liontree, told Dealbook about the public reaction.

Industry insiders quickly began wondering which sport might come next.

Saudi Arabia’s giant sovereign wealth fund, known as the Public Investment Fund (PIF), has a strong interest in sports. Investing in WWE, F1, domestic soccer leagues (which is why the country has created a huge war chest to sign big stars such as: Lionel Messideclined the offer this week).

However, Saudi Arabia’s history of human rights violations has stymied some deals within the United States. In 2019, after the murder of Washington Post columnist Jamal Khashoggi, entertainment giant Endeavor returned $400 million in funds invested. And until recently, the PGA Tour was keen to use Saudi Arabia’s record to match.

That moral concern appears to have been overridden by the PGA Tour’s business concerns. The deal with LIV Golf was finalized after rival circuits gained momentum, luring players in with big purses and ultimately winning the championship. infeasible For the PGA to compete.

“The Saudis didn’t change history, they didn’t change who they are,” said Lyle Eyes, CEO of sports investor Verance Capital. “This deal made sense.”

Essentially a commercial partnership, the deal could pave the way for more sports companies to accept PIF funding, Eyes said. (Critics would say that was one of the goals Saudi Arabia pursued in investing in sports in the first place.)

LIV Golf’s strategy will be difficult to implement in other sports. Baseball faces challenges that jeopardize investments in rival fan base aging, the regional sports model is collapsing, and there aren’t many spare baseball fields big enough to accommodate a major league team. It will take a lot of players and hard work to become a National Football League rival. Create Competitive League I failed.

The National Basketball Association may be the easiest team league to challenge. Basketball requires fewer players than baseball or football, and courts are fairly easy to find and build.but given Amount already paid by US playersit is unclear what rival leagues can offer.

Tennis is probably the most likely candidate for a rival tour. Like golf, it is an individual sport, so it is easy for the PIF to lure players in with expensive checks. And while there’s a smaller pool of stars to pick than golf, rival leagues only need a dozen players for an elite tour. Some tennis stars have already played in Saudi Arabia, including fifth-ranked Stefanos Tsitsipas. Diriyah Tennis Exhibition. The threat of competition from Saudi Arabia is believed to be one reason the WTA raised money from private equity firm CVC Capital this year.

Not all options involve poaching athletes. Officials said they expected Saudi Arabia to start investing in US sports teams. NBA already changed the rulesAllow it. And while the NFL doesn’t allow institutional investors, many expect that to change soon.

And while that road seemed inaccessible a few years ago, the most efficient route for the PIF to own a major sports series like the PGA Tour may now be to simply acquire that series. unknown.

“It would certainly be easier to come in through the front door,” says Liontree’s Michael.

“If the PGA had said from the beginning, ‘Hey, you’re going to value us at a significant premium and give us $3 billion,’ we wouldn’t have created LIV Golf.” — Lauren Hirsch

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For decades, Saudi Arabia’s sovereign wealth funds — state-owned investment institutions that invest in a range of assets, including stocks and private companies — have been lesser-known and unremarkable than funds run by other Persian Gulf states or Singapore. was an investor.

Then in 2015, Mohammed bin Salman seized power as the kingdom’s de facto ruler.

Since then, the Public Investment Fund, a sovereign wealth fund, has been the driving force behind Prince Mohammed’s massive efforts to convert the Saudi economy away from oil. In a key part of its campaign, Vision 2030, the State Fund has poured billions of dollars into foreign companies, making it one of the world’s most flashy investors.

The Public Investment Fund has acquired multibillion-dollar stakes in Uber and electric-car maker Lucid. Bet $45 billion on the Vision Fund, a highly ambitious technology investment vehicle created by SoftBank. and invested $20 billion in a Blackstone-led infrastructure fund.

Here, we showcase how PIF’s deal formation efforts span the globe, including shares acquired as a limited partner of an investment firm.

A deal with LIV Golf and the PGA Tour could give Saudi Arabia a new status in professional sports. It could also bring a new spotlight to golf- and cigar-loving PIF Governor Yasir Al Rumayyan, a key figure in the kingdom in all kinds of investments.

Popularity will rise at once. Al Rumayyan, 53, has played far from the world stage for most of his career. A graduate of King Faisal University, he worked his way up through the ranks of a Saudi brokerage firm and Saudi financial market authority. His appointment coincided with the rise of Crown Prince Mohammed, and in 2015 he was appointed leader of the PIF.

Under Al Rumayyan, the PIF began to strengthen its financial strength globally, including in the sports world. And what solidifies Al Rumayyan’s centrality in Saudi economic activity is his dual role as chairman of Saudi Aramco, the country’s oil giant and source of its vast wealth. Under him, the fossil fuel producer began trading in the world’s largest initial public offering, now valued at $2 trillion.

But its new rise threatens to put Al Rumayyan in a difficult position. A bitter legal battle between the PGA Tour and the LIV has forced the Saudi financier to take a deposition that could expose the inner workings of the PIF and the true power he wields within it. rice field. That threat appears to have receded—at least so long as there is agreement.

Ultimately, however, Al Rumayyan still has to answer his powerful clients. Prince Mohammed has argued that Saudi Arabia will become the tech society of the future, fueled by global deal closures and staggeringly high investments in domestic infrastructure projects.The fund also said that its investments The product of freewheeling decision-makingdoes not necessarily rely on traditional structures such as investment committees.

Last year, in the only earnings disclosure ever released by the PIF, the PIF said: made a profit of 25% But if that massive investment campaign doesn’t pay off, it’s likely Al Rumayyan will get the answer.

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