Marvel Entertainment Group
Introduction
In December 1996 Marvel Entertainment Group filed for bankruptcy. Marvel came up with a reorganization plan that meant that Perelman, Marvel’s largest shareholder, would invest $365 million in exchange for 427 million newly issued shares. Carl Icahn, one of the main bondholders, did not support this plan. On March 7, 1997, a confirmation hearing was scheduled at which both parties would vote on the proposed reorganization plan.
In this case study, we will first look at why Marvel filed for bankruptcy. Then we will evaluate the proposed restructuring plan and explain why it will not be supported by Carl Icahn. Moreover, we will explain why it will be more difficult for Perelman and his holding companies to issue debt in the future. Furthermore, we will discuss the decline in price of Marvel’s zero-coupon bond in November 1996 and explain why investors sold their Marvel bonds. Finally, we will give an overview of what happened to the company post 1997.
1. Marvel filed for bankruptcy
On October 8, 1996, Marvel announced its default and filed for bankruptcy two month later. The bankruptcy was not caused by one single reason, but rather by a combination of internal and external factors. We will discuss the reasons from the perspective of the market environment, company strategy and execution.
As Marvel’s CEO Scott Sassa concluded, “it was like everything that could go wrong did go wrong”, the change of market environment inevitably influenced Marvel’s business. For years, speculative collectors who viewed comic books as a form of investment were part of Marvel’s most important consumer targets. However, collectors stopped buying in 1994 after failing to realize significant returns. Lacking of these consumers, the sales of comic books declined markedly. At the same time, the trading card market was also impacted by the popularity of professional baseball and hockey. From the case, we can see that in 1995 these two divisions, Sports and
In December 1996 Marvel Entertainment Group filed for bankruptcy. Marvel came up with a reorganization plan that meant that Perelman, Marvel’s largest shareholder, would invest $365 million in exchange for 427 million newly issued shares. Carl Icahn, one of the main bondholders, did not support this plan. On March 7, 1997, a confirmation hearing was scheduled at which both parties would vote on the proposed reorganization plan.
In this case study, we will first look at why Marvel filed for bankruptcy. Then we will evaluate the proposed restructuring plan and explain why it will not be supported by Carl Icahn. Moreover, we will explain why it will be more difficult for Perelman and his holding companies to issue debt in the future. Furthermore, we will discuss the decline in price of Marvel’s zero-coupon bond in November 1996 and explain why investors sold their Marvel bonds. Finally, we will give an overview of what happened to the company post 1997.
1. Marvel filed for bankruptcy
On October 8, 1996, Marvel announced its default and filed for bankruptcy two month later. The bankruptcy was not caused by one single reason, but rather by a combination of internal and external factors. We will discuss the reasons from the perspective of the market environment, company strategy and execution.
As Marvel’s CEO Scott Sassa concluded, “it was like everything that could go wrong did go wrong”, the change of market environment inevitably influenced Marvel’s business. For years, speculative collectors who viewed comic books as a form of investment were part of Marvel’s most important consumer targets. However, collectors stopped buying in 1994 after failing to realize significant returns. Lacking of these consumers, the sales of comic books declined markedly. At the same time, the trading card market was also impacted by the popularity of professional baseball and hockey. From the case, we can see that in 1995 these two divisions, Sports and
References: Barnes, B. and Cieply, M. (2009). Disney Swoops Into Action, Buying Marvel for $4 Billion, The New York Times. 31 August 2009 Esty, B.C. and Auerbach, J. (2007). Bankruptcy and Restructuring at Marvel Entertainment Group, Harvard Business School Funding Universe [no date] Marvel Entertainment Group, Inc. Funding Universe