did everything go wrong at Marvel Entertainment (former stock
symbol MRV) when Ronald O. Perelman was chairman and principal
owner-- from 1989 until he filed for bankruptcy at the end
Wars reveals how Perelman built a complicated structure of holding
companies to control Marvel, aggressively expanding America's
leading comic books publisher by acquiring subsidiaries at very
high prices: Fleer and SkyBox sports trading cards, an Italian
sticker company, and a comics distributor called Heroes World.
that increase the old Marvel's debt?
to stunningly high levels. The debt to major banks, led by Chase
Manhattan, rose to over $600 million. Comic Wars shows how Perelman's
reputation as a big borrower -- notably in his bold and contested
takeover of Revlon -- made him a great customer for the banks. They
habitually said "yes," even to finance the acquisition
of Marvel's expensive subsidiaries.
did the banks realize that the loans wouldn't be repaid?
Marvel lost money, for the first time since Perelman took it public.
That was in 1995. He tried to reorganize the company, in a way that
could be highly beneficial to him but not to other stockholders
or bondholders, but they rebelled -- so he filed for Chapter 11
protection in Bankruptcy Court in Wilmington, Delaware in December
was Marvel losing money?
the expansions were so expensive, it was hard for Marvel to keep
up with debt repayments to the banks. The Major League Baseball
strike shattered the enthusiasm of fans, so baseball card sales
plummeted after 1994. Basketball cards didn't sell well, either,
and the NBA was charging a high royalty fee that Marvel had agreed
to pay -- unrelated to sales levels.
big crisis, however, was the fact that the craze for collecting
comic books suddenly died down. Perelman had his management print
more and more titles -- even four different covers for each issue,
hoping to create "collectors' items" -- but the tricks
Perelman's management know how to keep comics popular?
His senior people didn't read the comics, and they never had.
Comic Wars shows how Perelman, since boyhood, read corporate
balance sheets -- but not comic books. And Marvel's most loyal fans
started to hate Ron Perelman as the villain who ruined the comics'
quality. Mom and Pop comic-book stores bitterly remember being impoverished
by his attempt to monopolize the market through his distributor,
principal owner, Ron Perelman must have suffered worse than anyone
from Marvel's failure?
exactly. When Marvel was still flying high -- in 1993 and 1994 --
he was clever enough to have his holding companies sell junk bonds.
Known as "Marvel high-yield zeroes," the zero coupon bonds
had a face value of nearly $900 million.
Wars reveals that Perelman is now being sued by a trust representing
former Marvel shareholders and unsecured creditors (using New York
City attorney Edward Friedman), charging that Perelman pocketed
$553.5 million in "unjust enrichment" from the junk bonds.
Perelman's privately held company, MacAndrews & Forbes, denies
on the hundreds of court documents and financial records -- many
thousands of pages in all -- that I've pulled together, I'd estimate
that Ronald Perelman profited from his eight years in charge of
Marvel to the tune of $280 million.
company failed. Perelman and his people shrug and claim they did
their best; but his critics say the junk bonds meant that his business
m.o. is: "Heads I win, tails you lose."
& Forbes, being a privately held company, doesn't say much --
when Perelman and his chief aide, Howard Gittis, feel that talking
is worthwhile; and that's not often. But Comic Wars takes
us inside the secretive conglomerate's headquarters -- the unmarked
Venetian-style palazzo known as The Townhouse -- at 35 East 62nd
Street. The Townhouse has a lot of clout on Wall Street.
cover of your book is a comic-book rendition of Ron Perelman in
a fistfight with Carl Icahn. Why Icahn?
Icahn saw Marvel faltering, he tried to move in and grab the company.
First, he bought a lot of the Marvel junk bonds -- noticing that
Perelman had pledged all of his common stock as collateral. Then,
when Perelman tried to restructure the company in 1996, Icahn adamantly
refused to give the required approval. Perelman defiantly filed
for Chapter 11, and Icahn then battled in the Bankruptcy Court.
Wars describes the cut and thrust of high-paid corporate lawyers
fighting at every hour of the night and day, several times reaching
tentative agreements in this roller-coaster case -- only to find
the deals disintegrating in the courtrooms of the Wilmington judges,
Helen Balick and Roderick McKelvie, who themselves were colorful,
distinctive, and often in disagreement.
walked away with his profits, throwing in the towel. In June 1997,
the judges awarded Carl Icahn control of Marvel Entertainment. He
appointed himself Chairman and tried to run the comic books company
-- a field he knew nothing about -- for six months. Comic Wars
gives a rare, inside look at his style and personality. Frequently
terrifying his business opponents, he insisted that the rough tactics
he used at TWA, U.S. Steel, Texaco, and Nabisco would work at Marvel.
December 1997, Judge McKelvie gave up on Icahn and appointed a Trustee
to run the company instead.
does Icahn say now?
as a lover of poker and baseball metaphors, he says that he played
his best hand but "knew when to fold," and that he has
"a great batting average" -- so why focus on his failure
this failure is one of his least favorite topics, he had most of
the principals in the case sign an agreement -- in the final settlement
in 1998 -- not to take part in the writing of any book about the
Marvel bankruptcy fight. Getting this story was no easy task.
obvious that Marvel survived -- the Spider-Man movie's opening on
May 3 of this year is getting plenty of publicity. So how did the
comic book company recover?
a really untold story of guts and determination. The heroes of the
story are two Israelis who've lived in this country for over thirty
years. Isaac (Ike) Perlmutter and Avi Arad now control Marvel, which
has a new NYSE ticker symbol (MVL).
a businessman specializing in "dollar-store" merchandising
and then in buying collapsed companies such as Remington Products
(the shaver maker), found himself owning Toy Biz -- a failing toymaker
with a license to make many items based on Marvel Comics characters.
He became intrigued by what Ron Perelman was doing at Marvel and
proposed an unusual semi-merger: Perelman's Marvel getting a substantial
share in Toy Biz, while Toy Biz got a perpetual license to make
Marvel toys without paying any license fees -- a huge saving for
an inveterate cost-cutter, met his fellow Israeli -- Avi Arad
-- because Arad was a toy designer who had made millions in
royalties on his creations. Ike was haggling with Avi, but
then instead plunged into partnership with him. They are an
"odd couple": the very conservative Ike generally
in tie and jacket, while the highly artistic Avi favors leather
outfits and motorcycles. Ike loves creative financing and
doesn't know the Marvel characters; Avi loves story-telling
creativity and is bored by numbers.
many ways, Avi Arad replaced Stan Lee as Marvel's greatest booster.
As Comic Wars recounts, Lee joined the company sixty years
ago and was the dynamic, nuclear core of Marvel's amazing rise --
as part of the American cultural scene -- in the 1960s when he co-created
Spider-Man and other characters that took the popular entertainment
world by storm. His "Marvel Universe" comprised over four
thousand characters: properties that an entertainment conglomerate
could exploit financially.
Lee -- though never speaking bitterly about Marvel, even in the
Ron Perelman years --moved to the West Coast, moved on to other
projects, and agreeably collects a generous salary from Marvel while
being required to do little.
Wars contains the uproarious details of the long and exhausting
fight for control of Marvel -- and for the very survival of Spider-Man
and the other characters -- but in the end the judge in Wilmington
let Toy Biz take over Marvel. As in any bankruptcy, the key ingredient
is to get the lenders' assent. That meant that Ike, Avi, and their
lawyers had to reach agreement with Chaim Fortgang -- the killer
lawyer hired by Chase Manhattan and the bank syndicate to squeeze
as many millions as possible out of this hopeless mess.
collected a fee of about $18 million. But he's had negative
coverage in the business press lately. Wachtell, Lipton, Rosen
& Katz reportedly lost patience with his aggressive behavior
and derisive remarks, and thus one of New York's leading bankruptcy
attorneys has been fired.
is the new Marvel succeeding?
looks that way. It's now called Marvel Enterprises. It doesn't own
the baseball card or sticker companies anymore, and a pretty conservative
management -- hand-picked by silent and publicity-shy Ike Perlmutter
-- vows to decrease debt, rather than borrow and expand as Ron Perelman
used to do.
stock, MVL, has quintupled in the past year as the fear of another
bankruptcy fades. As well as publishing the Spider-Man, Hulk, Fantastic
Four, X-Men, and other comic books, the new Marvel still dabbles
in toys but is focused on "licensing". Comic Wars
shows how that is a high-margin business, where Marvel has very
little overhead and simply enjoys revenue-sharing and royalty checks
from movie companies, pyjama and lunchbox manufacturers, and others
that want to use Marvel's iconic characters.
key to MVL's current success is that Avi Arad loves the Marvel heroes.
He knows their stories backwards and forwards. He's pretty much
given up designing toys, and now he lives in Los Angeles and serves
as executive producer for all the movies based on Marvel characters:
the current Spider-Man and Blade 2, next year's Incredible Hulk
(now being shot by director Ang Lee) and X-Men 2, and more than
a dozen others now in the Hollywood pipeline.
an expert on foreign affairs and intelligence -- especially in the
Middle East? Why did you write Comic Wars?
happened to meet some of the people involved in this fight, and
the story was so amazing -- so funny, so full of characters and
passion -- that I couldn't resist. It turned out that the skills
of an experienced investigative journalist were needed to ferret
out the truth. The losers were very reluctant to say anything about
the Marvel battle, and the winners insisted that they have their
hands full trying to resuscitate the business.
addition, the bankers and lawyers didn't want to offend future clients.
But one of the factions that insisted on knowing the truth was the
loyal troupe of Marvel comics fans. They wondered why quality suffered
in the 1990s, why the company went bankrupt, and how Marvel managed
to get itself back on its feet -- heading for what could be greater
triumphs in movies, television, the Internet, video games, and comics.