After LIV Golf, what’s the next Saudi sports bet?

After LIV Golf, what's the next Saudi sports bet?

When the Saudi Arabian-backed LIV Golf Series announced a deal Tuesday to link up with the PGA Tour, it stunned deal makers in the sporting world.

Alex Michael, a managing director at investment bank Liontree, told DealBook about the general reaction, “It’s a mixture of shock and disbelief.”

Industry insiders were quick to wonder which game might be next.

Saudi Arabia’s massive sovereign wealth fund, known as the Public Investment Fund, or PIF, has an appetite for sport. It has invested in WWE, Formula 1 and a national soccer league (for which the country has built up a huge war chest to sign big stars) Lionel Messiwho turned down an offer this week).

But the state’s history of human rights violations has been an obstacle to some deals in the United States. In 2019, entertainment giant Endeavor returned the fund’s $400 million investment following the murder of Washington Post columnist Jamal Khashoggi. And until very recently, the PGA Tour was eager to use Saudi Arabia’s record against it.

Ethical concerns seem to have been outweighed by the PGA Tour’s business concerns. The deal with LIV Golf came together after rival circuits picked up traction and enticed players with bigger purses, eventually making it impractical To compete for the PGA.

“The Saudis didn’t change history or change who they were,” said Lyle Ayes, chief executive of sports-investing firm Veras Capital. “The deal just made sense.”

Ayse said that effectively a commercial partnership, the deal could open the door for more sports businesses to accept PIF funds. (Critics would say that was one of Saudi Arabia’s goals in pursuing sports investment in the first place.)

In any other sport it would be difficult to topple the LIV Golf Playbook. Baseball faces a challenge that would make investing in a rival league risky: its fan base. Ageing, the regional sports model is collapsing, and there are no additional baseball stadiums large enough for a major league team. A rival to the National Football League would require a large number of players and previous efforts create competitive league have flopped.

The National Basketball Association may be the easiest team league to challenge. Basketball requires fewer players than baseball or football, and courts are much easier to find or build. but given how much american players are already getting paidIt’s unclear what a rival league might offer.

Tennis is probably the best candidate for a rival tour. Like golf, it is an individual sport, which makes it easy for PIFs to entice athletes with bigger checks. And while golf has a smaller pool of stars to recruit than in comparison, a rival league would need only a dozen players for a typical tour. Some tennis stars have already played in Saudi Arabia, including fifth-ranked Stefanos Tsitsipas. Diriyah Tennis Exhibition, The threat of Saudi competition is probably one reason why the WTA raised money from private equity firm CVC Capital this year.

Not all options include hunting athletes. Insiders say they expect the Saudis to start investing in American sports teams. nba has already changed its ruleto allow it. And while the NFL doesn’t allow any institutional investors, many expect that to change soon as well.

And while that route wasn’t available a few years ago, the most efficient route for PIF to a major sporting series like the PGA Tour now may be to acquire just one.

“It would definitely be easier to come through the front door,” said Michael of Liontree.

“If the PGA had said from the beginning, ‘Hey, you can value us at some huge premium that we think we’re worth and give us $3 billion,’ we would never have had LIV golf.” -Lauren Hirsch

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For decades, Saudi Arabia’s sovereign wealth fund – a state-owned investment vehicle that invests in a range of assets including stocks and private companies – was a quiet investor, trailing those run by other Persian Gulf countries and Singapore. was less famous than

And then Mohammed bin Salman came to power in 2015 as the de facto ruler of the kingdom.

Since then, the sovereign fund, the Public Investment Fund, has become the engine of Prince Mohammed’s mammoth effort to shift Saudi Arabia’s economy away from oil. As a key part of that campaign, Vision 2030, the state fund has poured billions of dollars into foreign businesses, becoming one of the world’s most prolific investors.

Public investment funds have made billions of dollars in stakes in Uber and electric car maker Lucid; bet $45 billion on the Vision Fund, the wildly ambitious tech investment vehicle created by SoftBank; and invested $20 billion in an infrastructure fund led by Blackstone.

Here’s how the PIF’s deal-making efforts are spread across the globe, including stakes taken as limited partners in investment firms.

LIV Golf’s deal with the PGA Tour could propel Saudi Arabia to new prominence in pro sports. It could bring new prominence to the head of state on all kinds of investments: Yasir al-Rumayyan, the golf- and cigar-loving governor of PIF

Sudden rise to prominence. For most of his career, Al-Rumayyan, 53, has operated far from the global stage. A graduate of King Faisal University, he worked his way up the ranks of Saudi brokerages and the kingdom’s Financial Markets Authority. His ascent coincided with the rise of Prince Mohammed, who appointed him to lead the PIF in 2015

Under al-Rumayyan, the PIF began to increase its financial power globally, including in the sporting world. And reinforcing al-Rumayyan’s centrality to Saudi Arabia’s economic drive is his dual role as chairman of Saudi Aramco, the state oil company and the font of its vast wealth. Under him, the fossil fuel producer began trading in the world’s largest initial public offering, which now commands a $2 trillion market value.

But that new prominence threatens to put al-Rumayyn in a difficult position: The PGA Tour’s bitter legal battle with LIV could force the Saudi financier to sit for a deposition, exposing the inner workings of the PIF and the true power that lies within it. That threat appears to have subsided — at least, until the deal goes through.

Ultimately al-Rumayyn must still answer to his powerful client. Prince Mohammed has insisted that Saudi Arabia will become a tech-enabled society of the future, driven by global deals and hugely expensive investments in internal infrastructure projects. The fund has also tried to beat down reports that its investments are Freewheeling Decision Making ProductsNot necessarily for traditional structures like investment committees.

Last year, in PIF’s only public exposure to date, it said Gave 25% return In 2021. But if its massive investment campaign fails to pay off, it will be Al-Rumayyan who is likely to answer for it.

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