February 17, 1998

In a decision that surprised few in the investment community, US District Judge Roderick McKelvie gave conditional approval to a reorganization plan for Marvel Entertainment put forth by Toy Biz, Inc. This plan calls for Marvel to be merged with Toy Biz, and for 40% of the new company, plus $230 million in cash, to be provided to the secured holders of $830 million in Marvel senior debt.

While the conditional acceptance of this reorganization plan is viewed by some as the end of Marvel's travails in Chapter 11 bankruptcy, it actually opens the window of opportunity to purchase Marvel by many potential bidders. This results from the plan of Toy Biz to first offer the merged companies for sale as package, before concluding the deal with the secured creditors. While the cost of purchasing the combined companies would be greater, the resulting settlement of litigation between the two over control of the Toy Biz board, and the potential release of the Marvel toy license from Toy Biz control, make the combination a much more attractive package for many potential investors. This has led to renewed speculation that any one of a number of international entertainment conglomerates might present a bid for the combined companies that exceeds the current offer on the table.

While this financial maneuvering has continued, both Marvel and Toy Biz have continued to enhance their prospects through internal improvements. Toy Biz has recently announced the acquisition of several lucrative licenses, including the master toy license for the upcoming Godzilla feature film. Marvel is seeing a continuing firming up of its sales in the direct market, and is anticipating a summer sales increase from promotions related to the 35th anniversary of Wolverine. In addition, the current "Spiderhunt" storyline in the Spider-Man family of titles has produced immediate sales increases of 20%, or more. These positive factors also contribute to optimism that the proposed Toy Biz deal is far from the last chapter of Marvel's bankruptcy adventures.