Dissatisfied with the less than super performance of Marvel Entertainment’s stock in recent months, Ronald Perelman’s MacAndrew & Forbes yesterday announced that it plans to make a cash tender offer of an estimated $ 300 million to buy up to 11 million common shares of Marvel for $ 25 a share.
That stake, added to the 60% of Marvel MacAndrews & Forbes already owns via its subsidiary New Marvel Holdings, would bump the parent company ownership to about 80%.
The news sent Marvel’s stock skyward, climbing $ 4.25, or 22%, to close at $ 23.75. “This is a $ 30-a-share stock by the end of this year,” contends Lisabeth Barron, an entertainment analyst at S.G. Warburg, who currently has a buy recommendation on the stock.
Also fueling the stock was yesterday’s announcement by Marvel that it was forming a new company, Toy Biz Inc., with Toy Biz and toy creator Avi Arad. Marvel will own 46% of the new venture.
While MacAndrew & Forbes would not comment, Wall Street drew its own conclusions.
“The stock was at $ 28 a share a few months ago; today it was at $ 19,” noted Barron. “They want to show the market that they think people are not recognizing the stock’s true value and that they believe it’s going a lot higher in the next year and a half.”
Marvel’s storyline has resembled that of its comic books in terms of incredible performance. Financier Perelman bought a controlling interest in the company in 1989 from New World for $ 82.5 million, financing 88% of the purchase through a revolving credit line.
Over the next couple of years, new managers goosed revenues 55% while multiplying profits sixfold. After a public offering in 1991 priced at $ 4.125 (split-adjusted), the stock has soared almost 600% over the next year and a half reaching a high of $ 28.25 in early January.
But some on Wall Street feared the stock was becoming overheated. The share price has drifted down on concerns that Marvel’s purchase of Fleer trading card company will make 1993 tough.
This is despite robust earnings both at Marvel and at Fleer and increased interest by Hollywood in the company’s characters (James Cameron is developing a big-budget Spiderman feature which is slated for domestic distribution by TriStar, while Wes Craven will do Dr. Strange for Savoy Pictures).
MacAndrews & Forbes said the offer for Marvel Entertainment will be contingent upon a minimum of 10 million shares being validly tendered and not withdrawn before the expiration of the offer.
The offer hinges on obtaining the $ 300 million in financing necessary to buy the shares and pay related expenses. New Marvel Holdings has retained Merrill Lynch to raise the necessary funds through the private placement of debt securities.