WHEN: Today, Tuesday, June 6, 2023
WHERE: CNBC's "Squawk on the Street"
Following is the full unofficial transcript of a CNBC EXCLUSIVE interview with CNBC's David Faber and PIF Governor Yasir Al-Rumayyan and PGA Tour Commissioner Jay Monahan on the announcement that LIV Golf and PGA Tour will merge. Following is a link to video on CNBC.com: https://www.cnbc.com/video/2023/06/06/pgas-jay-monahan-and-pifs-yasir-al-rumayyan-break-down-surprise-deal-to-merge-pga-and-liv.html
DAVID FABER: Welcome, Jay and Yasir, thank you for being here. Just this picture alone is going to surprise a lot of people seeing the two of you together smiling. Given especially what has been the hostility between LIV and PGA so let's just start where I think a lot of people have a question is how in the world did this come about? You know, Jay, I can do a very quick Google search and find lots of not particularly nice things you were saying about not the PIF but LIV so tell us the story.
JAY MONAHAN: Well, listen, I think today is a historical day for the PGA Tour and the game of golf. And it's a historical day for the PIF and the DP World Tour. And you're right. You know, there's been a lot of tension in our sport over the last couple of years. But what we're talking about today is coming together to unify the game of golf. And to do so under one umbrella. And David, the way that we're doing that is we're creating a for profit, LLC that the PIF is going to invest in alongside the DP World Tour. And together, we're going to move forward and we're going to take efforts to grow and expand this great game and to take it to new heights. And so what's happened today and to your earlier question, is we've recognized that together, we can have a far greater impact on this game than we can working apart. And I give Yasir, great credit for coming to the table coming to discussions with an open heart and an open mind. We did the same and the game of golf is better for what we've done here today.
FABER: I want to talk about the game of golf. What this will mean I also want to talk about the structure of this but just to get a better sense here. Have you guys been talking to each other for months? Did you have to make the first call, you know, I just am curious about a bit of the background here again, given what has been the hostility between the two how you sort of were able to forge what clearly is some sort of a bond now?
YASIR AL-RUMAYYAN: I received a call from Jimmy Dunne who is one of the board members at the PGA tour and he just called me and introduced himself. And said he would love for us to meet. And I asked him immediately would you like us to sign an NDA and he said no there is no need. That kind of trust is how we started the relationship. So we met in London. And we had a lunch followed by the next day a round of golf and then another lunch. We had discussions. We covered everything. And one of the things that I said then have we met two or three years ago. The impact that we will have in the game of golf will be lessened.
AL-RUMAYYAN: Because it would be something small, but the way we're doing our partnership it's going to be really big in many senses. We will have both LIV and PGA Tour to in addition to all of our assets, and we will be investing in in the growth of the game of golf and we will be doing many new things that I think will have a better engagement from the players, the fans, the broadcasters, the sponsors, everyone else and hopefully to even give a better access to more and more people to the game of golf the way we would love to do make the game of golf very much accessible just like any other sport, just like football, basketball, any others and that's what we don't have right now.
FABER: Right. Jay, from your perspective, when you I mean, first you had a meeting with Jimmy Dunne, obviously at this meeting, and it kind of went there. Give our viewers now sense of the structure of this. You've talked a bit about the fact that you're nonprofit, but you're going to create a for profit, you're going to merge essentially and be a for profit company.
MONAHAN So the C6 C still stays in place. And out of the C6 we will continue to operate our tours will put our player retirement plans and assets there. So that stays in place. I think it's very important. One of the things that's important to both of us is every single week we're playing tournaments, we're making a huge impact on the communities where you know, we're invited guests that continues and at the C6 level, you take the assets of the PGA Tour The PIFs assets and LIV with the Asian tour and the DP World Tour take all those commercial assets drop them down into that for profit LLC. This is early. We're gonna go through a valuation of all of the businesses and the PIF will invest in newco. And importantly, as Yasir was quick to point out, there'll be an additional investment in growth initiatives and that's what's really exciting here there are two elements to be unified as it relates to the tours and then to be able to go out in our own model David, we've been somewhat handicapped and that as a C 6 were passed to organization. Now to have this for profit, LLC to have the PIF and Yasir investing in it, for him to serve on our board to serve as chair of the board of newco puts us in a position where we can go out and we can address some opportunities in the marketplace.
FABER: And to be clear NewCo is LIV and PGA and the DP World Tour but you got to figure out this is a memorandum of understanding you don't have a definitive agreement yet right. So what has to happen before you get to a definitive agreement.
AL-RUMAYYAN: We will do the valuation. That's the starting point, we agreed on the framework, which is something that is really great and excellent first step. Once we get the valuation agreed on
FABER: So you have got a value LIV you've got a value PGA essentially
AL-RUMAYYAN: their commercial rights because the PGA will stay outside but their commercial rights
FABER: That will then trigger whatever the capital commitment initially is going to be from the PIF?
AL-RUMAYYAN: So initially, we will just do the valuation. We will create the board. The board will be the majority will be from the PGA Tour. I'll be chairman Jay will be the CEO of the new company. The idea is to keep everything independent, but strategically they're all aligned. So the idea that we have instead of competing, we're going to be complemented and to look for additional venues and that's where the PIF capital investments will come in will kick in. So we'll be either creating acquiring and doing some new things to grow the game of golf.
FABER: What would those be I mean, give me some sense here as terms of let's let's go down the road a bit. This is this entity has been created. What are you going to call on the on the PIF for funds for?
MONAHAN: So you look at you look at the structure of our sport, you look at our schedule itself. There's a lot of fragmentation. There's a lot of different golf organizations that creates inefficiencies. We can address that and we see real opportunity right in that alone. You look at the structure of the tour today. We've talked a lot about sports betting. You've talked we talked a lot about our data business, our proprietary data, business and investments that we can make there not only at the Tour level but also across our sport generally we've got 29 clubs in our TPC portfolio, the real estate and club business. We think there's real opportunity particularly when you look at it alongside some of the biggest tournaments in the world.
FABER: So new events, new courses
MONAHAN: Yeah, we will be investing new events, new courses, new technology, new initiatives that are tied to growth of the game all over the world. But ultimately, David, if you're a player today or you're a fan today, the initial investment and time is going to be in looking out 10 years and what is the right structure for the game at the highest level? How do you inspire people to get there? How do you use PGA Tour and the DP World Tour schedules today? The innovation that the PIF has put into, into LIV Golf, team golf in particular, and how do you move forward in a way where you're not only bringing the sport to more people as it relates to the highest expression of it at the men's professional game, but additionally, you're finding a way to bring team golf to a much broader audience around.
FABER: Tell me a bit about innovations that you've just talked about. I mean, again, you're saying positive things about LIV people may be surprised but what was it about what they were able to do, for example that you did admire team golf, you've mentioned anything else?
MONAHAN: I think number one is a passion for the game of golf that you see you feel experience every single conversation that you have with this man and that passion manifests itself in, in a belief in innovation and a belief in continuing to push boundaries. And I think that in and of itself with us restructuring our business and being in a position to utilize the power of the PGA Tour brand use the power of our scale alongside a great partner and a great investor. That's, that's what's gotten us here. And that's what should be most exciting for people and fans.
FABER: Yasir, we're talking about potentially billions of dollars being invested from the PIF, correct?
FABER: Over what period of time?
AL-RUMAYYAN: That's an excellent question. So, the first step is today. The second one is, you know, the definitive agreement. Then we are creating the board and the governance of the whole thing is we will evaluate every proposal that will come to us at the board level. So whatever it takes, that is how much is the commitment that we are committed for.
FABER: Do you expect to consolidate all these other entities as well? You are creating one entity for global golf, essentially?
AL-RUMAYYAN: Exactly. That's the idea. And the potential there is really big. I mean, if you look at the size of golf monetary wise, it's about 100 billion today. And I think the growth is there. And I think we can -- working together, we can have a faster growth rate than the way it was for the past 10 or 20 years.
MONAHAN: David, if I could add, I think when you look at the game on a global basis, there are now more people playing the game outside the U.S. than playing inside the United States. Okay, you look at everything that has transpired in terms of the forms of distribution, Top Golf and all the other ways that people can interface with our sport. There are now people off course – more off course participants than on course participants and that combined audience in the U.S. is 48% under the age of 35. Reaching a younger demographic at a time when the sport has never been more popular, and doing so by coming together to collaborate at this point in time, that's where we see the commonality and purpose and that's where we see this huge opportunity.
FABER: What are your expectations, Jay, for when the public learns about this? The players? The fans? You think they're going to respond positively? I mean, you're describing a scenario under which PIF at some point could have the majority of the economics – correct me if I'm wrong – of this entity. Essentially, the Saudis sort of people will say, oh, they control golf around the world. I'm just curious as to what you think the response is going to be.
MONAHAN: Listen, a lot of people have been reading about the tension and that we've talked a lot. And I said previously that we were going down our path, they were going down theirs. And today, that tension goes away. The litigation is dropped. We're announcing to the world that on behalf of this game, we're coming together. And it's less about how people respond today and it's all about how people respond in 10 years. And when they see the impact that we're having on this game together, there'll be a lot of smiles on people's faces, and there'll be a lot more people playing this game all over the world. And if you're a young player that wants to get to the highest level of the game today, you'll be more inspired than you've ever been before.
AL-RUMAYYAN: And if I may add even if the capital contribution for the PIF will be at some stage or after the valuation process, bigger than the contribution of the PGA still the control and at board level is for the PGA.
FABER: The governance stays with the PGA.
AL-RUMAYYAN: Except for the certain things that has to have the full board. The normal circumstances the control stays with PGA. We are there for a number of things, you know, to have the right governance to have the right business propositions and to make the growth but the control we trust, the PGA tour we understand and we honor and we respect the history that the PGA Tour has. And after meeting, Jay a number of times, I mean we met initially we didn't meet in London I met with Jamie and Ed but he came with Jamie and Ed to Venice, and we went to San Francisco and again in New York. So there was meetings
FABER: So a World Tour.
AL-RUMAYYAN: Exactly It was and there was so many meetings and we had so many discussions deep discussions. One on one and with the group I mean I remember the first time we met we just sat down him and I in Venice for about two hours trying to understand each other so we just sat down. He talked about his basically aspirations his life. I did the same thing to even my family was with me in Venice we had lunch with a big group of people. So I think the understanding and the positive thinking is what really unites us and volunteers the game of golf right passion that we have both of us, I think, is what's really cemented this kind of agreement.
and it's all about how people respond in 10 years.
FABER: Yasir, what are your expectations in terms of the public response? Again, Saudi Arabia comes in for criticism, for example, from people who are advocates for human rights and things of that nature and sure to get mixed up in that. This idea that the Saudis now control again, I understand governance, but that's going to be the headline, control the game we love. You know, I'm just curious how you thought through that.
YASIR AL-RUMAYYAN: We are investing in the game that everybody loves. The control is not there. It's the governance that we would like to have. It's going to be you know, a voting system and a board and the majority of the board will be the PGA, it is not going to be with us. I think and I heard this many times in different you know, investments
FABER: I am sure this comes up a lot.
AL-RUMAYYAN: Like you know, what we've done in Newcastle, we had the same thing and if you look at the turnaround story that we made in Newcastle, was really a case study by itself, and less than one and a half year return team that was threatened to be in the relegation all the way up to the fourth position in the Premier League. The same thing I think we will do with our new company between the PGA and ourselves.
FABER: What is it with the Saudis and sports? What do you see in terms of and clearly value, this idea of these global franchises. You know, I mean, I've talked about, you know, WWE or F1 just in terms of the interest there, not to mention, of course, what we call soccer, the rest of the world calls football.
AL-RUMAYYAN: Because it's, you know, a ball and a foot. That's why football.
FABER: I get it. You're, you're right, we're wrong. But anyhow. But what about the value? What is it that you see as an investor, one of the largest funds available in the world to you, that is so compelling?
AL-RUMAYYAN: What's, what's going on right now is in Saudi is unprecedented anywhere else in the world. We started with something called the Vision 2030 by the Crown Prince, and this vision was announced back in 2017. PIF is one of the major components of this vision, now and the PIF back in 2017, we issued our first five-year document, which is called Vision Realization Program. We put all of our aspirations and targets and objectives and KPIs and by the end of 2020, we achieved all of these targets, you know, the job creations, the GDP contributions, the sector developments and everything else. Back in January 2021, we issued the second Vision Realization Program and by the way, it's a public document, it's in our website, and anyone can have access to it. And that document, we said, we're going to be looking and interested in 13 different sectors, sports and entertainment is one of these sectors in addition to aerospace, technology and—
FABER: But why sports and entertainment? Why sports in particular?
AL-RUMAYYAN: If look at the, you know, the population of Saudi Arabia, a huge percentage of our population under the age of, I think 75% is under the age of 35. Now, with with that, I think you will have a lot of young people who are interested in sports and entertainment and that's basically part of the offering. The historically speaking football was the dominant sport in Saudi. In the past, I think eight, maybe five years ago, we created different number of federations for every sport that you can think of. So we are interested in and all of and all of these sports, it's not only golf or football or basketball, but it's many other sports there. That's the reason why we would like to, to invest in sport, in addition to the financial returns. So—
FABER: There are financial returns though that we're talking about here without a doubt.
AL-RUMAYYAN: Oh definitely. So it makes financial sense to us. And that's only way going forward. We don't like to subsidize things but we would like to have it sustainable and the only way—
FABER: So you think the billions that you'll be investing in this new entity are going to generate a significant return?
AL-RUMAYYAN: That's that's the whole idea.
FABER: Why, why?
MONAHAN: Listen, PGA Tour has been around since 1968. I mentioned to you earlier, our our model. We're transitioning from a (c)6 to a (c)6 plus a for profit LLC. This is an opportunity we've never had before and to have this capital at this point in time with the strength of this game, there's just there's so much opportunity, and it's opportunity we have not been able to activate but we will now and we're going to do it in a highly disciplined, rigorous way. And when you when you look at our sport, the PGA Tour has never been stronger than it is right now. And it's strong because of the way our players continue to compete. The legacy driven pro-competitive model. There are different ways to interface with our sport, to come together and do this together with DP World Tour, PIF and other organizations as we move forward creates opportunity at scale that we haven't been able to see or do so it will produce an investment return otherwise we would not be here right now.
MONAHAN: And that's the whole point.
FABER: And you think there are any issues at all moving from that not for profit to for profit, you think you're gonna get any again push back at all or—
MONAHAN: I don't. I mean, I think you look at our membership organization and the way that we treat our members doesn't change at all. You know, there's certainly precedents for this model in other sports and we're very confident.
FABER: And Jay I just you hearing the global golf essentially in one entity I wonder antitrust, is there any concern that regulators are going to say wait a second, you have two competitive tours now and you're combining, is that a concern?
MONAHAN: Every single player in men's professional golf is going to have more opportunity and more growth. As we look to contribute to the women's game, I would expect the same. And as an industry, we're going to grow our industry so I think this is all, this is all a positive on that front and I don't expect any issues.
FABER: What happens to players on LIV now? Will they eventually be able to play—
MONAHAN: Listen, we've—
FABER: How does that work when you're when you're part of their tour and not yours?
MONAHAN: We've today we've come together to announce that we're collaborating going forward. There's a lot of work to be done. There's a strong spirit of partnership. Those are the details that you know that we'll be getting into. But ultimately, the world needs to know that the PGA Tour PIF DP World Tour have come together and the tension's gone and these are things that we're going to solve together.
FABER: And the litigation's gone as well. You know, a couple of final questions here. Television rights. I mean, if you were successful here, it would seem as though you could negotiate sort of a different kind of a package. Is that, is that true? Or what does it mean in terms of the rights here if you are successful in sort of putting it all together—
MONAHAN: I think these are the kind of discussions that we'll have going forward. Once we have identified step back, evaluate the PGA Tour, LIV, the DP World Tour, identify the path and plan forward, it's going to create opportunities across the media landscape, and we've got great media partners. I know they're going to be excited about this announcement today. And we're going to create more value for them. And those are discussions that we'll have.
FABER: Yasir, how much more time to get to the definitive agreement. Your opinion from here.
AL-RUMAYYAN: I think it's a matter of weeks. We, we have agreements on, you know, the framework, which is an excellent first step. And it all depends on on, you know, just finalizing the many things, including the valuation. Once we get the that, I think it's, it's just a matter of weeks.
MONAHAN: We're gonna get that done.
FABER: You're gonna get it done, you guys are both confident. This is not some memorandum of understanding that we're going to have a big announcement around and then never see definitively—
MONAHAN: No. Next time we're together with you. We're going to be talking about what we've done and more specifically about where we're going. We're not going to be having a conversation about why this didn't happen.
FABER: Well, I'm happy to hear that we're going to do this again, at some point. So that's good as well. What are your expectations, you know, in terms of the valuation process, though? Yasir, I mean specifics here because I like M&A, do you have different advisors who are going to come to some sort of have to come to some sort of agreement in terms of what this is worth and that entity is worth.
AL-RUMAYYAN: Absolutely. So I mean, you know, there are different methodologies of valuation. The way it will be we will have our own advisors, they will have their own advisors, and most likely we will have an additional independent adviser that gives fairness opinion for both shareholders and then we'll move on.
FABER: Does Greg Norman know about this?
AL-RUMAYYAN: He is. I made the call just before this, and of course, he's a partner with us and all the stakeholders that that we have, we have with us. They had the call just right before this interview.
FABER: Well, a lot of people will certainly be interested and surprised, of course. Gentlemen, it's been great to have you both and certainly appreciate it and we'll be watching closely. I look forward to the next interview.
MONAHAN: Thank you David. We will as well.