A Deal Lawyer’s Look at the Framework Agreement Among PGA Tour, DP World Tour, and Saudi Arabia’s Public Investment Fund
Golf has been in the news a lot lately: fierce battles, intrigue, enormous prizes, heated rivalries – and even the occasional story about people hitting little white balls in actual tournaments.
LIV Golf – founded in 2020 with the backing of the seemingly abyssally deep pockets of the Saudi Arabian Public Investment Fund (PIF) – began making waves (and garnering headlines) long before their first signature team golf event in June of 2022. By aggressively targeting high-profile golfers from the PGA Tour and the DP World Tour (the former “European Tour” – which we will now have to remember to stop calling the “European Tour”) with offers of enormous sums of guaranteed cash, LIV Golf made an immediate splash in the world of sports (and international finance). Just like that, they declared their willingness and ability to compete with the entrenched sports establishment, which is certainly unlike most rival leagues in recent years (we’re looking at YOU, USFL! No, not the 2010 proposal that didn’t get off the ground or the pathetic 2022 version that lasted about an hour and a half! We’re talking 1983-1985 when New Jersey finally got to host a professional football team that wasn’t named for their rivals across the Hudson River!)
Reports of PGA and World Tour players defecting to the upstart league for reported amounts in excess of $100 million (even Tiger Woods was allegedly offered, and rejected, an amount in the “high nine-figure range”) raised the possibility of an existential threat to the PGA and DP World Tour.
Of course, the PGA and World Tour fought back aggressively by suspending defecting golfers. And then, in the most American of fashions, the golfers hired some of the biggest names in Big Law litigation to sue the pants off the PGA for antitrust violations. The PGA, in turn, hired their own mega-litigators to countersue LIV Golf and the players for tortious interference with contracts … classic sports!
The result was a schism more typically seen in an overwrought soap opera or an episode of one of the ubiquitous “Housewives” franchises.
Then, in early June 2023, came the shocking announcement that everyone had kissed and made up! (Except the players who were angry and confused by the secret negotiations!) In return for everyone dropping their lawsuits, the PGA, DP World Tour and LIV Golf were “merging!” Although the announcement was widely reported, very little was known about the details until a four-page (five if you include the signature pages) Framework Agreement was leaked and reported on in late June. Subsequent hearings held on Capitol Hill on the day this is being published seem to corroborate the authenticity of that agreement.
As corporate and M+A lawyers, what struck us (in addition to the sheer insanity of the whole situation) was how utterly traditional this rather vague “Framework Agreement” was. The Framework Agreement is nothing more than a glorified Letter of Intent (“LOI”) or Term Sheet, mostly a non-binding roadmap for what the so-called “merger” will look like. In truth, the deal is more of a joint venture with substantial contributions of assets to a newly formed limited liability company and rights of first refusal for the PIF to invest in future endeavors and exercise some sponsorship rights for a marquee event thrown in for good measure. But that doesn’t fit well in a headline.
Just like nearly all non-binding LOIs, the parts that stood out to us (after we geeked out on the proposed corporate structure, services agreements and board composition) were the couple of binding sections. Hanging out on page 3, after the sections which deal with how the parties will contribute key business assets into the “Newco, LLC” and manage the new entity, and a rather vague promise to “cooperate in good faith” to deal with reintegration of the renegade golfers, and before some general legalese about confidentiality and press releases, are a couple little gems: the non-solicitation language that effectively ends the poaching of tour players and an agreement to immediately dismiss “with prejudice” all lawsuits and enter into a settlement agreement.
This Framework agreement, like most LOIs automatically sunsets if no binding agreement is reached. In this case, at the end of 2023, if no agreement is reached, the parties get to revert to “operating their business in the state that existed pre-agreement in their discretion.” All standard stuff. But given the fact that LIV will spend the next six months NOT increasing their profile by attracting more players, and their antitrust lawsuits against the PGA will have been dismissed, the playing field may look remarkably different in the winter of 2024. If nothing comes of this “Framework,” it could, in our opinion, substantially impair LIV Golf’s momentum and leverage.
We guess time will tell.
In the PGA-LIV Golf case, all the parties are dealing with teams of the best and brightest deal lawyers in the country, who have certainly combed through every word of this rather short agreement. But at the end of the day, even (mostly) “non-binding” term sheets can have far-reaching and important impacts on the parties. So, here is the takeaway – before you enter into a significant business contract – even a non-binding one – please, please, PLEASE run it by an experienced lawyer who can explain what you are getting into. Thank you!
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