PGA Political Golf Drama: Saudi’s Trump Card

NEW YORK, Feb 12 – The escalating scrutiny surrounding Saudi Arabia’s potential investment in golf has spurred accusations from U.S. lawmakers. Former Citigroup power banker Michael Klein and other consultants linked to the sovereign’s Public Investment Fund face allegations of aligning with the Middle East nation. As the deal with the PGA Tour remains in flux, delays in resolution could play to the advantage of the Saudis.

In the past week, a Senate subcommittee convened Michael Klein, McKinsey’s Bob Sternfels, Boston Consulting Group’s Richard Lesser, and Teneo’s Chief Executive Paul Keary for a comprehensive hearing on national security. The impetus for this interrogation was, in part, a surprise June agreement between the PGA and the former archrival PIF-backed LIV Golf, outlining the potential for collaboration between the two entities.

Since then, members of Congress have been encircling the Public Investment Fund (PIF) due to concerns about external influence and the exercise of soft power over the national tour, characterizing it as a form of ‘sportswashing.’ The summoning of this group to Capitol Hill stemmed from an injunction by the Saudis, preventing the disclosure of information.

Michael Klein elucidated that such a move was unusual for the Public Investment Fund, while Bob Sternfels noted McKinsey’s active contestation of the ruling. Nevertheless, Senator Richard Blumenthal accused them of succumbing to the will of the Saudis.

While the proceedings may be perceived as political theatrics – with discussions ranging from China to opioids – the heightened attention could potentially involve the Committee on Foreign Investment in the United States, chaired by the U.S. Treasury. The expanded mandate of this agency empowers it to intercede in deals with non-controlling stakes in companies possessing critical technology, infrastructure, or personal data.

Simultaneously, an official agreement between the PGA Tour and LIV-Golf is yet to materialize. In late January, the PGA announced a partnership with Strategic Sports Group, a consortium of team owners including John Henry of the Boston Red Sox and Steven Cohen of the New York Mets, securing an investment of up to $3 billion. Notably, this group of American investors extends a welcome to the Public Investment Fund.

The inability to finalize a deal with the PGA currently plays into the Saudis’ favor. As the United States anticipates the presidential election in November, the ensuing uncertainty, including the potential return of former President Donald Trump, adds another layer of complexity. Collaboration with agencies like the Committee on Foreign Investment in the United States is an integral part of any president’s role, yet a new administration might display a less hostile stance towards transactions in general – particularly those of foreign nature – compared to the current regime under President Joe Biden. In this evolving environment, the strategic utilization of political theater allows for the buying of time and consideration for any impending deal.