Yesterday, Anime News Network reported that 4Kids plans to sell “substantially all of [their] Yu-Gi-Oh!-related assets” to KidsCo Media Ventures, LLC. KidsCo is incorporated in Delaware, though their listed address is identical to that of the Saban Capital Group. In addition, contact e-mail addresses for Kidsco are also tied to “saban.com.” Currently, KidsCo is listed as a “stalking horse” bidder on the properties. As a formality, an auction will be held for the assets if a qualified bidder appears. However, KidsCo’s status offers numerous protections that include a fee that must be paid to the company if they don’t win the auction.
The primary asset for sale is referred to as the “Yu-Gi-Oh! Business.” According to documentation, this is the rights to all business related to the property. This includes all grant ageements and all purchased assets relating to Yu-Gi-Oh!, as well CW and 4Kids rights to use and profit from the property and brand. The sale would also include 4Kids’s rights to Dragon Ball Z and Draon Ball Z Kai. The sale is scheduled to close on June 30, 2012.
From the background information, we can infer the following potential situations, which we will elaborate upon:
- 4Kids’s extended lawsuit with TV Tokyo and Nihon Ad left the company in a difficult financial situation… well, more difficult.
- KidsCo is affiliated in some manner with Saban Capital Group.
KidsCo’s state of incorporation is meaningless – Delaware is the most popular state for companies to incorporate in, as the state’s tax structure, court system, and laws favor corporate entities. So, this will be ignored as we discuss this topic.
4Kids’s financials are possibly the most important factor in this situation. We all knew that the company was in dire straits in 2010, when 4Kids revealed that a third party was interested in acquiring them. Several hints were dropped through the year that seemed to indicate an inevitable acquisition. This came amid the company’s posting of a $3.5 million loss (which was followed by further losses in the third quarter)and a delisting from the New York Stock Exchange shortly thereafter. Insult was added to injury as TV Tokyo and Nihon Ad Systems filed suit against 4Kids in 2011. 4Kids was charged with “underpayments, wrongful deductions, and unmet obligations” that totaled $4,792,460.36 in damages. This led to TV Tokyo and Nihon Ad Systems terminating their agreement with 4Kids.
If you may recall, dear reader, people were doing the equivalent of dancing in the streets. 4Kids was dead in their eyes, and their ills would no longer harm the anime market.
Howver, the tale continued to twist and turn, as a bankruptcy judge ruled that 4Kids’s license was still valid, through the bankruptcy proceedings and lawsuit. In March, the case was settled amicably under undisclosed terms, and 4Kids was granted the rights to continue use of the license as well as $8 million in damages.
Which brings us to today.
The combination of weak overall market performance, mounting losses, and a bankruptcy-induced reorganization are enough to leave a company scrounging for money. Combining these factors with an expensive year-long legal battle would have many corporations looking to stay afloat in any way possible. While Yu-Gi-Oh is a profitable property, its value on the market, as a kid’s show, a card game, and a merchandise source can be immediately translated into a lump sum of cash. While 4Kids was granted $8 million total in the settlement, it’s difficult to say just how much the company actually kept of it. Several court appearances, as well as arbitration between the two parties leads to a combination of court and attorney fees that must be paid for. In addition, the company still has outstanding obligations, none of which were specified in previous news reports, aside from the losses they took and the fact that the company is in bankruptcy to recover from debts.
What is most interesting is the fact that the earching horse bidder is affiliated to Saban. Saban, which is headed by Haim Saban, is an investment firm based in Los Angeles. The company holds the domestic rights to several live-action Tokusatsu brands in America, including Power Rangers, VR Troopers, and Masked Rider. The company hasn’t had much interaction with the licensing market since the 1990s. However, they do recognize a strong brand, and I don’t doubt that Saban would utilize the property that they’ve purchased. The company’s ability to work with and profit from even seemingly small brands ensures that they will do everything in their power to grow the brand further.