marvel comics turnaround - Turnaround Management Association

Marvel Comics Turnaround Team 2
try to gain a controlling interest in Marvel so that he could gut it and sell its assets 13 . The estimates
of Marvel’s net worth both under a liquidation plan and as a “going concern” were not enough to
satisfy both creditor groups, so they fought in bankruptcy court 14 . Just as the courts were about to
award the bondholders with the lion’s share of Marvel, Toy Biz’s CEO Ike Perlmutter struck a deal
with the banks to back a reorganization plan that involved a merged Toy Biz/Marvel entity, whose
combined assets could provide greater value than Marvel alone. After several rounds of legal
battles, the bankruptcy court eventually ruled in Perlmutter’s favor and the two companies were
allowed to merge into a new company called Marvel Enterprises.
In the end, Marvel was able to overcome the key hurdle regarding the option to merge,
which was identifying a suitable company to merge with – it ended up merging with the company
that it was most closely tied with. The same could be said for Toy Biz. From the perspective of
the bank creditors, the merger increased the amount that they could recover and potentially earn in
the future with a viable, combined new company. The bond holders, who were unsecured, lost the
most, but even there, the bankruptcy court approved a very creative suggestion – that they would
be able to recover a large percentage of any money won in a lawsuit targeted at Ron Perelman for
corporate negligence and fraud. The thinking was that the bond holders had taken a calculated risk
in buying the risky bonds that Perelman had issued during his stint at Marvel and that any recovery
should be at the hands of the man from which they bought the risk. In the end, the bond holders
did not win the lawsuit because the courts ruled that Perelman had not broken any laws.
Ultimately, the big winners were the banks and Toy Biz. The banks received $232M cash,
13M common shares, 8M preferred shares at an 8% dividend plus the right to buy more shares,
13 Raviv, Dan. Comic Wars, Broadway Books, NY. p. 61
14 Raviv, Dan. Comic Wars, Broadway Books, NY. p.81. In December 1996, total outstanding debt for Marvel was
$725M from banks, $1B from bondholders. The estimated liquidation value was $447M and the estimated “Going
Concern” value was $520-$660M.
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