PGA Deal’s Real Estate, Data Stir National Security Review Calls

Professional golf wouldn’t typically pose national security concerns, but the PGA Tour’s proposed merger with Saudi Arabia-backed LIV Golf is triggering calls for an investigation into the deal’s foreign influence implications.

The surprise June 6 announcement, coming after a nearly year-long legal battle between the rival tours, would hand the merged entity’s chairmanship to the head of Saudi Arabia’s Public Investment Fund with a new PGA-majority board.

Among the lawmakers who’ve called for a federal investigation of the deal are Senate Finance Committee Chairman Ron Wyden (D-Ore.), Sen. Mitt Romney (R-Utah), and House Financial Services ranking member Maxine Waters (D-Calif.).

“U.S. officials need to consider whether a deal will give the Saudi regime inappropriate control or access to U.S. real estate,” Wyden tweeted.

The task will likely fall on the Committee on Foreign Investment in the United States (CFIUS), a little-known interagency body that investigates foreign investments in American businesses and real estate purchases that could have national security implications.

CFIUS review of a sports transaction would be an “unprecedented” move, said Luciano Racco, the co-chair of Foley Hoag’s international trade and national security practice.

But the deal poses some key issues—with data collection on PGA fans, the PGA-owned golf courses’ proximity to US government installations, and the merged entity’s ability to flex “soft power” on messaging and trade—that could warrant CFIUS discussions, attorneys said. Any CFIUS review of the deal will set a precedent for similar foreign investments in sports, as Saudi Arabia seeks to burnish the country’s reputation through sports investments.

“CFIUS already has jurisdiction over this deal,” said Nazak Nikakhtar, the former assistant secretary for industry and analysis at the International Trade Administration. “It’s an existing US business with a foreign buyer—it at least needs to be probed for security risks.”

At least one PGA-operated golf course is located within a mile of a US military installation in Maryland, according to a Bloomberg Law analysis of CFIUS’ database. That’s a detail that increases the likelihood of CFIUS review and could be the subject of a mitigation agreement, Nikakhtar, now a partner at Wiley Rein, said.

CFIUS often leans on merging parties’ voluntary disclosures to start an investigation. And it’s unclear if PGA and LIV will voluntarily file papers with the agency, Racco said.

Janet Yellen, who, as Treasury secretary, is also the chair of CFIUS, told CNBC this week that “it’s not immediately obvious” the deal is an issue of national security. The question is up to the committee to decide, she said.

In The Rough

CFIUS can block mergers. But it more often requires companies to adopt measures to mitigate its concerns, such as agreements to not transmit sensitive data outside the US, Racco said.

CFIUS could have “serious questions” about the user data PGA collects from ticket sales and its mobile phone apps, Nikakhtar said. If the committee takes up review, it would likely examine the soft power gains Saudi Arabian and allied interests could exploit, she said.

“I’m not saying there’s a there, there, but it’s due diligence,” Nikakhtar said.

Golf course locations could emerge as an issue, she said. TPC Potomac, which is operated by PGA, is less than a mile from Naval Surface Warfare Center Carderock in Bethesda, Md., according to a Bloomberg Law analysis of the CFIUS database. At least nine other courses operated by the Tour are located within 10 miles of CFIUS-monitored military installations across the country.

“Because CFIUS has jurisdiction over real estate transactions near certain military bases, we know it’ll look at geography and proximity to those bases and that will be relevant,” Nikakhtar said.

The committee has ramped up its focus on real estate purchases after a 2018 law gave it explicit authority to review them.

Investigators may also probe whether the tie-up is a “weaponized acquisition” that could degrade or destroy PGA, she said.

CFIUS’ motivating questions on that point could include “what happens if the PGA disappears—is that going to impact national security? What if it disappears and is replaced by a foreign business?” Nikakhtar said.

International Sports

Saudi Arabia is a familiar subject for CFIUS. About a dozen acquisitions of a controlling interest in a US business by Saudi Arabian entities were flagged to the committee between 2016 and 2021, according to annual Treasury reports to Congress.

Saudi Arabia has been on a sports-asset shopping spree, and how CFIUS handles the PGA deal could lay bare some questions that are likely to emerge in future deals. Its sovereign wealth fund has gotten a foothold in Formula 1 racing, pro wrestling, English soccer, and boxing.

“Do we think the Saudis, who have been acquisitive of sports assets around the world, are going to stop at the PGA? How about an NBA or NFL team?” Racco said. “How CFIUS handles this matter will be looked at as precedent for future transactions involving perhaps more popular sporting events and teams.”

President Joe Biden has pushed CFIUS to more aggressively examine foreign investments, signing in September the first-ever executive order expanding the factors the committee should consider. Risk to Americans’ sensitive data was a major component of the order.

A potential investigation of a golf deal would be unlike any other undertaken by CFIUS. But the committee’s consideration of what constitutes a national security vulnerability has grown broader in recent years, said Christopher Monahan, a partner at Faegre Drinker.

If CFIUS “imposes mitigation or does anything to slow or harm the deal, then yes, I think in any future deal involving the PIF and other investment in major professional sports, they’d be crazy not to look at it as precedent and plan their deals accordingly,” Monahan said.