Saudi golf clubs play through CFIUS hazards

NEW YORK, July 14 (Reuters Breakingviews) – The sport of golf is waiting to grill in the summer. US congressional lawmakers probed PGA Tour officials on Tuesday this week about the group’s ties to a rival golf tournament owned by Saudi Arabia. But the country’s public investment fund already has large stakes elsewhere in the United States. Within the framework of the country’s review of foreign investments, these deals technically carry greater risk. Saudi’s cash infusion into a favorite American hobby will test a new frontier – soft power.

The drama surrounding golf is tailor-made for the latest chapter. For years, the sport quietly suffered as younger generations spent more free time on screens and a move into American cities drew the next generation away from the suburbs. The political zeitgeist also went against the sport. Golf was often played at country clubs and they were exclusive. For example, Augusta National Golf Club, where The Masters is played, only invited its first female members in 2012, when it asked former Secretary of State Condoleezza Rice and South Carolina financier Darla Moore.

Covid-19 started to reverse the negative golf trend, but still some big American stars were motivated to look elsewhere to cash in on their years of undervalued success. Enter the Saudis, who launched an upstart golf tournament last year, LIV Golf, competing with the US-based PGA Tour and its European counterpart DTP. With its deep pockets — PIF has approximately $700 billion in assets under management — LIV Golf lured top players such as Phil Mickelson and Brooks Koepka away from the PGA, starting an expensive, bitter feud that resulted in lawsuits. The announcement of the agreement on June 6 was something of a surprise truce. The PGA and DTP entered into a partnership to create a new joint venture with LIV Golf.

The unnamed for-profit entity combines the licensing and marketing agreements for PGA, DTP and LIV Golf and will be jointly owned by the three groups. The PGA, which will remain a non-profit, will have a majority stake in the company. PIF, meanwhile, will initially be the exclusive investor pouring over $1 billion into the new establishment. The full board is yet to be finalised, but for now it will be chaired by PIF Governor Yasir Al-Rumayyan with an executive committee comprising three other PGA-affiliated officials. They include Ed Herlihy, a partner with proxy fight and takeover expertise at the law firm Wachtell, Lipton, Rosen & Katz. Even if PIF’s investments grow, the Saudis will remain in the minority, according to a version of the deal reviewed by Breakingviews.

The event has not gone down well with several influential Americans. Former AT&T (TN) CEO Randall Stephenson quit as director of the PGA Tour Policy Board on Saturday, citing that he could not “objectively evaluate or in good conscience support” the deal with the PIF especially given the US intelligence report on the 2018 killing of journalist Jamal Khashoggi by Saudi agents. US lawmakers took a similar stance, nervous that a “brutal repressive regime” — as Sen. Richard Blumenthal said during Tuesday’s congressional hearing — “may buy influence” and take over a “beloved American institution.”

Given the harsh spotlight and the fact that the investment is just a minority stake, there appears to be momentum to put an end to the union. PGA officials confirmed during their testimony that the Justice Department is investigating antitrust concerns. The Committee on Foreign Investment in the United States, led by the US Treasury Department, could in theory also weigh in on the scheme. Senators Sherrod Brown and Maxine Waters urged Treasury Secretary Janet Yellen in a letter on June 16 to investigate the deal. That scope of the watchdog was expanded under new rules introduced in 2020 that strengthen and define national security regulatory reviews beyond just voluntary applications. Transactions related to technology, infrastructure or data from overseas buyers must undergo mandatory evaluations by the committee. Minority investments related to these sectors, depending on the level of control, are also fair game.

On the face of it, the PGA and LIV Golf’s newfound friendship fits only a tiny bit of CFIUS’s parameters. Saudi Arabia, for example, has a seat on the board. Still, the committee’s past actions suggest the alliance has little reason to worry. First, US President Joe Biden has shown little interest in grouping Saudi Arabia in the same camp as countries like Iran and China. His administration ruled last year that Saudi Crown Prince Mohammed bin Salman has immunity from prosecution over Khashoggi’s murder.

Also, there is about $35 billion in Saudi PIF investments in a smorgasbord of U.S. companies including Walmart ( WMT.N ), Visa ( VN ), Uber Technologies ( UBER.N ), Live Nation Entertainment ( LYV.N ) and ( AMZN.O ) that have been allowed by Uncle Sam. Even the more problematic ones that might warrant a deeper look because they relate to technology and data have flown under the radar: PIF, for example, is the top shareholder in EV maker Lucid ( LCID.O ), with a 68% stake, according to Refinitiv. Earlier this year, the Saudis bought mobile gaming company Scopely for $4.9 billion.

The challenge for lawmakers and opponents of the golf deal is that it represents potential influence that is harder to control. There are concerns that Saudi Arabia, a regime considered hostile to women and LGBTQ groups, would have significant influence on golf culture. It’s not a big leap to imagine the possibilities: The National Basketball League was in the middle of a firestorm in China when a Houston Rockets executive tweeted in support of pro-democracy protests in Hong Kong four years ago. The People’s Republic pulled sponsorships and refused to air basketball games popular with the Chinese, causing the NBA to backslide. FIFA also bowed to threats by 2022 World Cup host Qatar to issue yellow cards to players wearing armbands promoting inclusiveness and in protest of the state’s laws against same-sex relationships.

The Department of Justice and CFIUS employ blunt tools, leaving the organizations ill-equipped to deal with the more insidious effects of soft power from non-US entities. Not to mention, lawmakers and the Treasury Department have yet to figure out how to contain TikTok, which is owned by China’s ByteDance and accused of being a national security threat by transferring American data to Beijing, a clearer case of danger under the CFIUS mandate . Saudi has a good chance to play through the agency’s dangers.

Follow @jennifersaba on Twitter


On July 11, the US Committee on Homeland Security and Governmental Affairs held a hearing on the PGA-LIV Golf agreement. The group quizzed PGA executives on the implications of the agreed joint venture between the parties announced on June 6. LIV Golf is owned by the Saudi Arabia Public Investment Fund.

Former AT&T executive Randall Stephenson resigned from the PGA Tour policy board, the Washington Post reported on July 9. Stephenson quit because the partnership “is not one that I can objectively evaluate or in good conscience support, especially in light of the 2018 U.S. intelligence report on Jamal Khashoggi.”

Editing by Lauren Silva Laughlin and Sharon Lam

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