The continuing saga of Diamond Comics’ bankruptcy has entered even more unexpected terrain.
As we noted earlier today, over the weekend, Diamond itself had filed notice that instead of going with the larger bid from Alliance Entertainment they were going with a slightly smaller combined bid from Universal Distribution/Ad Populum. Alliance, which was already making plans for the acquisition, is not taking this lying down and has filed a complaint alleging that their bid was the proper one and should be recognized by the bankruptcy court. In addition they are asking for court fees and “other and further relief as the Court deems just and proper.” While it’s not exactly a lawsuit, it has all the language of a suit.
While the hundreds of pages of filings in this bankruptcy have mostly been rote legalese, the complaint filed by Alliance Entertainment is full of details and strong language, such as “Debtors’ inexplicable refusal to seek this Court’s approval of, and to consummate, the sale of their assets to the successful bidder at an auction they conducted.”
The filing includes a complete timeline of the auction process and subsequent negotiating over certain clauses that Diamond asked for. The very broad overview is that after the auction on March 24th, Alliance entered into negotiations with Diamond. Meanwhile, Alliance claims, Diamond was secretly negotiating with Universal/Ad Populum and began ghosting Alliance, even though they had agreed to an additional $14 million in their offer. From the complaint:
Debtors, however, never feeling bound by the Bid Procedures Order, used the Auction to steer the sale of their assets to the Stalking Horse Purchaser. In pursuit of their illicit goal, Debtors concealed material information from bidders (other than the Stalking Horse Purchaser) at the Auction and changed the rules of the Auction after it began in order to ensure that the Stalking Horse Purchaser emerged as the party with the highest and best offer. Their efforts failed miserably when the Stalking Horse Purchaser—who, at the start of the Auction was secretly teamed up with another bidder, Ad Populum LLC (“Ad Populum”), to increase the Stalking Horse Purchaser’s financial clout—affirmatively dropped out of the bidding, leaving AENT’s offer as the highest and best bid. Having failed in their attempt to influence the outcome, Debtors were constrained to declare AENT the Successful Bidder at the conclusion of the Auction. Indeed, even after Debtors declared AENT the Successful Bidder, Debtors spoke to Universal of the record, before finally announcing what was obvious to all in attendance, that AENT was the winner of the Auction.
Among the revelations in the filing is the name of the third qualified bidder: Basic Fun, a toy company that makes Care Bears, Tonka, Lite Brite, K’nex, Lincoln Logs, Tinker Toys, Fisher Price, Littlest Pet Shop and other brands beloved to boomers and zennials alike. They submitted a $50 million bid.
Meanwhile, Alliance was “shocked” to find that Diamond was allowing Universal and Ad Populum to submit a combined bid.
The Auction was held as scheduled on March 24, 2025, where Debtors took over eight hours to start the Auction. There were three sets of bidders for the whole company assets (Lot D), AENT, Basic Fun!, and Universal/ Ad Populum. After the Auction began, but before bidding commenced, Debtors announced, to the shock of AENT, that they had arranged for Universal and Ad Populum to bid as a group. Ad Populum was interested in purchasing only certain assets of Debtors, and allowing the two bidders to collude with one another increased their financial wherewithal to outbid AENT and Basic Fun!. Debtors believed this would further their goal of steering the sale to Universal, their preferred purchaser, without regard to the interests of the estates or creditors.
By the end of the Auction, AENT’s bid for $72,245,000 (inclusive of stalking horse protections) was determined to be the highest and best bid. Angelo Exarhakos on behalf of Universal/Ad Populum group then stated, “we’re out,” indicating they would not counter with another bid. At this point, the Debtors stopped the Auction and met privately with Universal. The details of that discussions were never disclosed. Upon resuming the Auction, Raymond James proceeded to declare AENT was the successful bidder and Universal/Ad Populum as the back-up bidder, stating “[t[he Debtors in consultation with the consultation parties have reviewed the bids with respect to Lot D. And we’re pleased to announce, obviously, the winner is [AENT] for Lot D. Thank you very much. The backup bidder is the B group of Universal and Ad Populum. Lot D is now closed. So there’s no bidding on Lot D.”
A glance through the hundreds and hundreds of pages of filings didn’t reveal the exact contents of Lots A-D, but Lot D (“substantially all the assets”) did NOT include Diamond UK. In a previously filing which includes the APAs (asset purchase agreements) for both Universal and Ad Populum, it’s made clear that the latter had “as the highest or otherwise best bid for the Debtors’ DCD Business, CGA Business and the Diamond Select Toy Business.”
Alliance threw shade on this bid in their complaint:
Ad Populum does not have the financial wherewithal to close the transaction in the Ad Populum APA. It does not have audited financial statements, and it has assigned its rights under the Ad Populum APA to a third party, who was not a bidder at the Auction and is not qualified to bid under the Bid procedures Order.
The third party is apparently Sparkle Pop LLC, a holding company for Ad Populum.
After going over all of this, I’m left with many questions, although I need to read the Alliance APA more closely.
• The Alliance offer was ultimately $85.37 million, more than the $69 million offered by the Universal/Ad Populum consortium. Why did Diamond want to go with what seems to be a lower bid? Perhaps (just a guess) it was because the U/A bid was more cash upfront than the $61,613,309 that Alliance was offering?
• Where does this leave DCD (Diamond Comics Distributors), the key asset as far as comics folks are concerned? Although it’s been obvious for months that Universal wanted to get into the US comics distribution market, DCD went to the Ad Populum part of the bid. Universal did acquire Diamond UK however, perhaps a business they could expand to the US?
• If the Alliance bid prevails, what will become of Diamond Uk which was NOT among the assets they acquired.
• I guess you can say goodbye to Free Comic Book Day?
• One observation: as juicy as this all is, I suspect the Bruce Ogilvie podcast was not what turned debtor Diamond against the Alliance bid. With the combined Universal/Ad Populum bid already approved before the auction on March 24th (much to Alliance’s chagrin), that bid was already getting support from Diamond.
Today’s hearing (probably concluded as your read this, but no outcomes announced) should answer some of these questions, but how many more twists and turns can this tale take? As always, there will be more to come.
