Days before a court hearing was set to take place April 7 to move ahead with the sale of most of Diamond Comic Distributors assets to Alliance Entertainment (AENT), Diamond owners had a change of heart and are now favoring a new, smaller joint bid by Canadian comics distributor Universal Distribution and pop culture manufacturer and licensor Ad Populum. Attorneys for Alliance immediately filed a lawsuit to block the change and a hearing was held yesterday in the U.S. Bankruptcy Court for the District of Maryland to try to sort things out.
The April 7 hearing was focused on the appropriateness of the Alliance bid and was adjourned before the hearing was completed. The parties were due back in court April 8 and a decision is due May 28. That timeline however, is now thrown into serious question following the filing of Alliance’s April 6 lawsuit challenging the legality of Diamond’s owners’ decision to back the offer from Universal and Ad Populum.
The suit accuses Diamond of acting in bad faith by conducting an auction “in a manner that was unfair to any party other than their preferred purchaser, and—despite having designated AENT as the Successful Bidder—acted with extreme bad faith in the period following the Auction.” According to the filing, AENT’s bid of $72.2 million was deemed the highest offer and that Universal/Ad Populum were the underbidders.
According to the lawsuit, despite the offer from AENT, Diamond secretly solicited other bids with an eye toward favoring Universal (who had placed a $39 million stalking horse offer at the time of the bankruptcy filing in January) and Ad Populum. After more negotiations between AENT and Diamond, the lawsuit says, Diamond “abruptly terminated” its agreement saying that it “would proceed with the backup bidder.” To facilitate the switch, Diamond filed a motion last week asking the court to approve the sale of the company's assets to the joint back-up bidder.
In its filing, AENT argued that its offer, which had been raised to $85.37 million, was much higher that the $69.1 million combined bid from Universal Distribution and Ad Populum, which included $49.6 million from Universal for Diamond UK and Alliance Games Distributions, and $19.5 million from Ad Populum for Diamond Comic Distributors, Collectible Grading Authority, and Diamond Select Toys.
If the current hearings about the sale of Diamond’s assets do not bring a resolution agreed to by all parties, a hearing on AENT’s lawsuit is set for May 28.
