My previous two columns have focused on the story of my short-lived
involvement with a group of investors seeking to purchase Marvel Comics
in January, 1998. As I related last time, my role in examining the Marvel
documents was to analyze the licensing division with an eye as to how much
potential revenue we could anticipate from this area. In the end, I had to
tell my fellow investors that there really wasn't a whole lot of licensing
potential left. Either the rights were hopelessly entangled due to bungling
on the part of Marvel's legal staff, or that most of the decent licensing
properties had already been sold for many years forward, in exchange for
upfront cash payments in previous years.
The one area that held some potential was the possibility of somehow
breaking the ToyBiz royalty-free licensing agreement. That license not
only gave ToyBiz the rights to produce any and all Marvel toys in
perpetuity, but also granted them a zero royalties rate! It seemed quite
plausible to me that the bankruptcy court had the discretion to void such
an encumbering agreement. That, in fact, was exactly what investor/raider
Carl Icahn was seeking in his reorganization plan for Marvel. He was so
sure he could have the toy contract terminated that he bet upwards of
$200 million of his money, and that of closely allied investors, by
purchasing Marvel bonds at distress prices.
It was exactly the prospect of losing their sweetheart agreement which made
ToyBiz owners Isaac Perlmutter and Avi Arad passionately committed to
purchasing Marvel. ToyBiz was almost completely dependent on its Marvel
license for its survival, so there was no way they could give up on this
deal. That is why Perlmutter arranged his own financing group, and
ultimately bid over $400 million for Marvel.
Returning to our investment group, while I was reading the licensing
agreements, the bankers whom I accompanied to the Marvel bankruptcy
trustee's office went over the financials. We were originally going to
work through the night to establish a criteria under which we could craft
a bid for the company, or some part of the company. We stopped for lunch at
1 PM, however, and it quickly became apparent from our conversations that
no one in our group thought Marvel was worth anything near what Icahn and
Perlmutter were bidding. There was some very strong potential in the
company, but with all the current financial and legal messes, it would
take years before the income streams could be restored to cover even the
$20 million per year in interest that a $200 million bid would entail. For
Icahn and Perlmutter to be talking numbers over $400 million, was simply
irrational except within the context of their own fears. Icahn was
terrified he would lose the $200 million he invested, and Perlmutter
feared losing ToyBiz.
In the end, they both lost. Perlmutter won the basic battle, gaining control
of Marvel, and leaving Icahn with chump change, and some worthless warrants.
Perlmutter's victory was short-lived, however, as the drawn-out legal
wrangling over Marvel in the bankruptcy court left Marvel's brand image
so tarnished that the toys that had seemed so important, suddenly stopped
selling. ToyBiz, in fact, has been a debilitating drain on Marvel's
resources during the past couple of years. Perlmutter ended up with Marvel,
but with a huge amount of debt, and very weak income streams.
To return to my original contention in this entire matter, all this damage
to the premiere comics company in America came about because of Ronald O.
Perelman. His takeover of Marvel first destroyed the consumer base through
relentless price increases and excessive expansion in titles, and then
loaded the company up with so much debt that it will be many years before
Marvel recovers its financial health. The losers in this affair turned out
to be everyone in the entire process, except Ronald O. Perelman. Fans lost,
creators lost, retailers lost, distributors lost, even competing publishers
lost. We will be paying for Ronald O. Perelman's sins for decades to
In the end, our bid for Marvel was never placed. After lunch we packed our
briefcases, and headed for the train back to Manhattan. We'd all invested
time and money into a process that could never succeed due to the
desperation of those we were competing against. We all learned a lot from
the experience, however, and I'm very glad that we at least gave it a shot.
For all his difficulties, Isaac Perlmutter has managed to keep Marvel alive,
and for that we should all be very grateful. He's shopping Marvel around
right now, and we all need to hope and pray that he finds a deep-pocketed
buyer who can easily absorb Marvel's debt. Then we all have the prospect
of seeing the comics industry bloom again after the destruction wrought by
Ronald O. Perelman.
Please send your e-mails to
your letters to:
Mile High Comics, Inc.
Attn: Chuck Rozanski
2151 W. 56th Ave.
Denver, CO 80221