Friday Dump 🥟 - PGA head fake, Orioles ownership, Hockey safety swag

Back at it for the Friday Dump 🥟

🔴 PGA/LIV Golf footsies might be getting a little chilly. On Wednesday, the PGA Tour agreed to an investment deal of up to $3 billion with Strategic Sports Group, led by Fenway Sports Group (parent company to the Boston Red Sox and Liverpool), to form a new commercial entity, PGA Tour Enterprises. The new entity will be valued at around $12 billion. This occurs just 7 months after an agreed upon merger between the PGA Tour and LIV Golf—but talks are still ongoing…which makes us wonder, was this golf monopoly all talk?

• The deadline to reach an agreement for the PGA/LIV merger was initially set for Dec. 31, 2023. Since that date passed, the deadline has been extended with an announcement supposedly coming in April ahead of the Masters. This doesn’t sound great, Bob! 

  • 25 days before the deadline, #3 world-ranked golfer, Jon Rahm jumped ship to join LIV Golf for a deal worth ~$500 million + equity in his new team 🫣.

  • And earlier this week, #16 world-ranked golfer, Tyrrell Hatton, did the same.

• LIV Golf gets all its funding from the Saudi Public Investment Fund (PIF), which means any deal that goes through will most definitely lead to a lengthy regulatory process with the U.S. government 😴.

• But with the new entity deal, ~200 golfers will become equity holders, accessing more than $1.5 billion in equity. It will revolve around their success on the course and will only be available for PGA Tour players.

🟡 Camden Yards has a new landlord. On Tuesday, private equity homies David Rubenstein (Carlyle Group) and Mike Arougheti (Ares Management) reached an agreement to purchase the Baltimore Orioles from the Angelos family valuing the team at $1.73 billion, according to Puck News. The group will start by buying 40% of the Orioles and will then buy the remaining 60% following the death of 94-year-old Peter Angelos, who stepped away from the team in 2018 due to illness (the team has since been in the hands of his sons, Kendall and Roman…jk jk Lou and John 😂). However, questions have been swirling in our heads. The valuation seems to be pretty low, right? Especially after just having the 2nd best record in baseball last year. So what gives?

• Peter Angelos bought the team out of bankruptcy court in 1993, for $173 million. Since his purchase, the team has had a losing record in 17 out of the 30 years and they had just six playoff appearances during that span 😖.

• There have been quite a number of issues between the Angelos family and the organization:

  • The team has continuously finished in the bottom 3 of payrolls (players/coaches salaries) in the MLB. This is a major issue. Since the MLB doesn’t have a salary cap, teams are free to spend their money how they want (i.e. if you ain’t spending you’re screwed).

  • There has been extensive legal drama since 2005 as the Angelos became majority owners of their regional sports network, MASN, and owe upwards of $300 million in unpaid rights fees.

  • In 2022, Lou alleged that John had plans to relocate the Orioles to Nashville, and that led to a suit being filed for control of the team.

  • Earlier in 2023, there were issues that John wanted the development rights to build around the Orioles ballpark, Camden Yards—just like the Atlanta Braves with The Battery.

    • However, the state of Maryland would not grant them the rights and instead reached an agreement on a new 30-year lease to stay put.

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🟢 Safety sells for the hockey community. Just this past Sunday, USA Hockey announced it will require all players 18 and under to wear neck laceration protection starting on August 1, 2024. This move comes just months after former NHL and Nottingham Panthers player, Adam Johnson died during competition. The International Ice Hockey Federation (IIHF) mandated the use of neck protection at all levels right after the incident and the NCAA and NHL are also discussing these matters as we speak. This would not be the first time tragedy like this has occurred on the ice. But with the push for mandates and legislation comes opportunity for the sport, their business partners, and equipment manufacturers to grow.

• After Johnson’s death, there was an influx in immediate consumer response that led to companies such as: Bauer, ShockDoctor, Aegis Impact Protection, and Tek2Sport dealing with supply and demand issues—which provided opportunity in the market, but also a reason why the mandate won’t officially begin until late summer.

  • Even Washington Capitals star, T.J. Oshie, decided it was best to make the switch by wearing a neck guard during games. It’s why he’s taking the next step to incorporate this cutting edge technology (see what we did there 😉) at his own company, Warroad. 

• According to 2022-23 USA Hockey data, there are ~556k registered players (~168k are 18+ y/o), so ~388k must abide by the mandate. If we assume the cost of a neck guard is between $30-70, the neck guard market is already between $11.6-27.1 million…and that’s not even including the IIHF and the potential opportunity of 18+ players and NCAA/NHL players to rock these bad boys 🤔.

• However, hockey is already considered one of the most expensive sports for kids. According to a survey by the Aspen Institute's Project Play (see Table 1), ice hockey comes in at #1 average annual spending by child and #3 in equipment behind skiing/snowboarding and field hockey. It’s safe to assume that number is only going to rise.

Rules of the Game:

Each Friday, we’ll breakdown 3 sports business stories that have caught our eye throughout the week and will be assembled in the following format:

🔴 - Stories that make us stop, think, and question.

🟡 - Stories with a hint of risk and unpredictability.

🟢 - Stories that make us feel good to go and empowered.