How Spider-Man and His Marvel Super-Friends Were Saved From Bankruptcy

Guest Blog: This is the story of two savvy businessmen who rescued a slate of Marvel heroes from a super-villain: bankruptcy

Marvel Entertainment, after barely surviving a bankruptcy battle from 1996 to 1998, transformed itself from a damaged comic book publisher to an intellectual property success story and then into a movie-making powerhouse, thanks to a gutsy decision in September 2005.

Avi Arad, one of the two ex-Israelis who defeated Ronald Perelman and Carl Icahn in bankruptcy court to win control of Marvel, managed to win a fateful, often fiery, argument against corporate board members who were totally allergic to risk in all its forms. With his COO, David Maisel, Arad was able to arrange a $525 million credit line for Marvel to make its own films.

(Updated: Further investigation and responses to the original blog post here suggest that differing factions have developed, when it comes to remembering who favored the decision to leap into movie financing and production.  Some say Arad was against it, preferring the old model where Marvel had a respected and comfortable relationship earning a few percentage points from big studios’ films using Spider-Man and the X-Men.

Arad insists that he was a major campaigner for the credit line.  "Some people in Marvel are trying to erase my name from the Book of Life," Arad tells The Wrap. "But history is my witness.")

The characters to star in those movies had never been acquired by Sony or Twentieth Century Fox. Listed in the announcement of the “non-recourse debt facility,” were some of the comic book favorites who would become part of the blockbuster success of "Marvel’s The Avengers" in 2012: Captain America, Hawkeye, and Nick Fury.

Arad then wrested Iron Man away from New Line Cinema, and he was able to persuade Universal to give up the right to use the Incredible Hulk in more films.

(Updated: Executives close to the decisions disclose now that New Line simply chose not to pay to renew its rights to use Iron Man. And people working at Marvel at the time say the pathway for moving ahead with the company’s own slate, starting with Iron Man, was the result of an artistic committee that included Marvel Studios’ California team but was chaired by Alan Fine, a longtime toy executive under Ike and Avi who prided himself on finding ways of marketing the company’s superheroes.)

Now the Avengers project was beginning to take shape. Arad's vision called for cross-promoting all the superheroes who were wholly owned by Marvel. Their separate adventures would shepherd millions of fans, worldwide, toward a climactic, mammoth movie putting all their favorites into one story.

The slate of Marvel Studios' self-made films began with "Iron Man," a surprise hit that sold $585 million tickets worldwide, and all the films did well. 

Arad, while producing that first hit, hit a wall at Marvel. As he saw it, there were too many headaches involved in having to answer to fellow board members, shareholders, and Wall Street analysts. 

He severed most of his ties with Marvel in May 2006. Arad felt he had built up enough of a reputation in Hollywood that he could pick and choose his favorite film projects in the years ahead, and he would continue to be a producer on some Marvel character films – perhaps most significantly, the sequels that led to a re-boot in July 2012 of "The Amazing Spider-Man."

The black-clad motorcycle aficionado valued his freedom more than his pocketbook, and Arad sold most of his Marvel stock and cashed in his options. 

As for Ike Perlmutter, Arad's partner through the whole ordeal of rescuing and reshaping Marvel, an outsider might have thought that Ike was coasting as Marvel’s CEO, but that verb was not even in his vocabulary. Instead of moving on to the next big investment, Ike found that he enjoyed managing this particular company with its interesting challenges and a team that was willing to embrace his cost-cutting style. 

A few of his studio executives in Los Angeles were fired for failing to climb aboard Ike’s new train of thought. They later told of Perlmutter’s unusual cheapness. To those who were chucked out, it was he who did not understand how movies are made. Yet it was he who was making a string of movies.                                                                                                                                                                                                                            

He still did not care about seeing the films, for fantasies starring costumed men and women with incredible powers were not Perlmutter's thing. Yet the debut of a new product line intrigued him. So he flew coast-to-coast to attend the "Iron Man" premiere at Mann’s Chinese Theater in Hollywood, but he sat alone, wearing fake glasses, a wig, and a false mustache so as not to be recognized. 

Inevitably, Wall Street began to wonder if Marvel itself might be up for sale. Hedge funds, venture capital firms, and large media corporations got in touch with Perlmutter and offered 20 dollars per share for Marvel, then 30, then up to 40. He was not moved. He wanted to find the right partner – someone who would pay a nice premium and also demonstrate plans that would build upon Perlmutter's work rather than screw it up.

Then along came Mickey Mouse.

Once contact was established, in the summer of 2009, a deal was reached fairly quickly.  That was principally because the chief executive officer of the Walt Disney Company, Robert Iger, approached Ike Perlmutter directly and made a wonderful impression on him. Iger praised what Perlmutter had accomplished since buying the old Marvel out of bankruptcy in October 1998, and the Disney CEO had – on paper and in his head – a merger plan that went beyond an attractive offer of 50 dollars per share. Iger clearly showed how beautifully the new, resurgent, post-bankruptcy Marvel would fit into the Disney empire.

Perlmutter prided himself on being a quick and accurate judge of character, and Iger had a kind of positive energy and seemed to be a man of his word. The Disney boss personally learned all he could about Marvel; and he also had the courtesy and business sense to bring his attractive and intelligent wife, longtime TV reporter Willow Bay, to dinner with Mr. and Mrs. Perlmutter. In complete contrast to the hell Perlmutter had lived through while struggling to merge Toy Biz and Marvel, this was the start of a comfortable friendship.

If only Ike and Avi were still a team — what a thrill they would have shared! They were still friends, but when Avi chose to move on — for more independence and fewer hassles — he ended up missing an even wider partnership that he would have enjoyed immensely. He did score a profit on Disney’s takeover of Marvel, because Arad had hung on to around a million shares.

Perlmutter had thirty times that much, and when the merger was consummated on the last day of December 2009, his haul was $880 million in cash plus $710 million worth of Disney stock. And that made him the second largest non-institutional shareholder in Disney — behind only the brilliant Pixar and Apple co-founder Steve Jobs.

Ike Perlmutter, a man who arrived in America with $250 forty-four years ago, now had over one and a half billion dollars.

Marvel and its characters, saved from the near-death experience of bankruptcy, now had a new lease on life.

Adapted from the new epilogue of the e-book “Comic Wars: Marvel’s Battle to Survive.”