In the wake of the surprising news that Alliance Entertainment has ended its agreement to buy a Diamond Comic Distributor (see End of Alliance), we reviewed what could be causing the termination and looked into what would happen to Diamond’s comic business if a backup bidder acquires the company.
First of all, why did the alliance end? According to the Alliance Entertainment asset purchase agreement for obtaining the assets of Diamond Comic Distributors approved by the court on April 11, the basis for the termination of the contract by the buyer was very limited.
- If both the buyer and the seller agree.
- If closures have not occurred prior to April 25th, or by the buyer by deadline dates extended by mutual agreement. The end was submitted on April 24th.
- By the buyer, the seller submits a file to sell the asset to another buyer and completes the sale.
- If Chapter 11 is converted to Chapter 7 bankruptcy.
- If an order that approves a sale to a buyer is “…not reasonably acceptable to the buyer in a manner that is practically unfavourable to the buyer.”
- If the seller violates the terms of the contract.
The relationship between Alliance Entertainment and Diamond was tense by Diamond’s attempt to change the auction winner and subsequent lawsuits by the Alliance, but the deal appeared to be heading towards closing. Perhaps when submissions come earlier this week, they will explain which of these criteria was adopted by the Alliance to end the alliance.
We’ve also looked at what’s known about backup bidding, which is probably coming in now. In the total offer, we are considering splitting the assets of Diamond Comic Distributors between the two companies.
Canadian Distributor Universal Distribution acquires Alliance Game Distributor for $49,634,950 and acquires Diamond UK at a price based on the company’s balance sheet.
Neca and Wizkids’ parent ad Populum will acquire “other assets of debtors sold at auction” for $19,495,050 without specifying what those assets are, according to amendments to the universal distribution asset purchase agreement filed earlier this month.
Details of the AD Populum purchase agreement are currently unclear. This is because the agreement was not included in the motion to sell the assets to joint bidders. No reason was given because there was no contract from submission.
Other assets for sale include Diamond Comic Distributor’s comic distribution business, Diamond Select toys and collectibles, and collectible rating agencies. AD Populum likely wanted Diamond Select to be suitable for NECA, and the price suggests that it is likely that it also includes the comic distribution arm.
Alliance Entertainment introduced two elements of uncertainty regarding AD Populum bidding (see Alliance Sues). It claims that ADPopulum may not have enough funds to close the transaction, and that AD Populum may allocate some of the transaction to another company.
Also, moving to backup bidders increases the likelihood that the acquisition will not be closed. Unlike the Alliance Entertainment Purchase agreement, the Universal Distribution Purchase agreement contains a “material and unfavorable change” clause. This allows buyers to escape in the event of material adverse changes in terms of business or acquired assets (taken in whole).
