Board game distribution major Alliance gets $39m buyout bid as owner Diamond Comics files for bankruptcy protection

One of North America’s biggest tabletop gaming distributors, Alliance Game Distributors, has received a $39m buyout bid from Canadian peer Universal Distribution after its long-time owner Diamond Comics filed for bankruptcy protection yesterday.

Alliance has been a heavyweight of US board game distribution since it was created through the merger of Chessex and The Armory in 1998, with both companies already major players in the sector before the deal was signed.

The company has maintained its strong position since being bought by Comics distribution giant Diamond in 2000, despite the ongoing woes of its parent company in recent years.

Diamond built itself into an almost monopolistic position in comic book distribution across close to 40 years, but a temporary shutdown caused by the Covid-19 pandemic saw it lose powerhouse publishers including DC and Marvel, while retailers have long complained about the company’s attitude and business practices.

The comic distributor’s filing for bankruptcy protection, which it submitted to a Maryland court yesterday, said that Diamond had received a $39m “stalking horse” bid for Alliance as part of its restructuring.

A “stalking horse” bid is usually arranged with a potential buyer to set a lower boundary for any other potential bidding, and could lead to interest from other board game distribution majors such as Asmodee or GTS.

Three board game publishers BoardGameWire spoke with on condition of anonymity expressed surprise that Asmodee had not been named as a bidder for Alliance, given the tabletop gaming giant’s announcement in November that it was preparing to “reignite” its acquisitions strategy.

That strategy has previously focused on buying up smaller board game publishers and distributors, however – especially to give it access to new markets – and it is unclear if Asmodee sees Alliance as a good fit to merge with its own extensive North American distribution operation.

Diamond said that in addition to the Alliance stalking horse bid, Canadian comics, toys and games distribuition major Universal had also entered into a non-binding letter of intent to acquire Diamond’s UK operation.

Universal president and CEO Angelo Exarhakos said, “Universal Distribution is looking forward to working with the Alliance and Diamond UK teams to bring a stronger balance sheet and growth opportunities to retailers and suppliers.

“Both companies have deep roots in the industry, and we look forward to continuing that into the future.”

Diamond said it had received commitments for up to $41m in debtor-in-possession financing from JP Morgan Chase, which will be used “to fund post-petition operating expenses and ensure adequate working capital to meet its obligations to associates and suppliers”.

The company owes tens of millions of dollars to creditors across the comics and hobby industries, the bankruptcy court filings show, with Penguin Random House alone owed more than $9.2m.

On the tabletop side, National Entertainment Collectibles – the owner of tabletop gaming major WizKids – is owed more than $2.6m, Hasbro over $1m, Wizards of the Coast more than $914,000 and tabletop gaming sales and fulfillment service Publisher Services Inc (PSi) about $223,000.

Alderac COO Ryan Dancey told BoardGameWire, “We had no prior notice and did not have any reason to suspect they were in trouble.

“They’re current in their accounts with us. We think the distribution tier has many challenges and that the tier as a whole is fragile so this did not come as an absolute shock, but I was pretty darn surprised.

“Our dealings with Universal have been excellent. I told my wife that them buying Alliance feels like the equivalent of AEG buying Wizards of the Coast. There were a lot of things I thought might happen in wholesale as the world changes but Universal buying Alliance was not on my list.”

He added, “Overall I think that the biggest challenge will be to effect a smooth transition with their biggest suppliers, of which AEG is not one.

“We are probably 1% of Alliance’s business (if even that big). I am sure that very difficult conversations are ongoing with Asmodee, The Pokemon Company, Bandai, Upper Deck, Hasbro, Ravensburger, etc – the $100m-plus a year businesses that make or break a wholesaler.

“If Universal is able to negotiate a continuation of business for their largest suppliers with minimal disruption of flow to product for retailers than from our perspective I think it’s status quo for us (which means very much managing the overall industry shifts), but if they have a troubled transition it could radically disrupt the market.

“Alliance occupies a unique part of the retailer supply chain and if they were forced by circumstance to downsize their footprint it is unclear if other companies would grow to replace them, or if we’d see a decrease in the overall number of units of our games being sold into the wholesale tier.

“In this case we’re in one of those circumstances where we just have to sit and watch as forces much larger than us collide and then we see what the outcome looks like. What is the African saying? ‘When the elephants fight the grass gets trampled?’ Unfortunately we’re the grass in that metaphor.”

Anne-Marie De Witt, CEO of Castle Panic publisher Fireside Games, told BoardGameWire, “I had heard mentions that Diamond wasn’t doing well financially, but nothing that hinted at a Chapter 11 reorganization.

“I didn’t give it much thought because rumors like that have cropped up periodically since we started seeing a glut of product in the industry around 2016.

“Alliance hasn’t been in touch with Fireside Games directly, possibly because we work with them through PSi. My standing meeting with my PSi rep is on Thursday, when I’m sure we’ll discuss any impacts.

“I’m encouraged to hear that Universal has made a stalking horse bid for Alliance. I’ve always enjoyed working with the folks at Universal. I trust them to handle the US distribution business if they end up winning the bid and retain the Alliance staff with strong retailer relationships.

“The risk for publishers and retailers during the transition is that the games Alliance carries will be less available through distribution while stock is inventoried and purchasing decisions are reconsidered.

“Other distributors may or may not be in the position to increase their budgets to accommodate more purchasing. So, we’ll probably see an increase in direct sales for a few months.

“I feel for the people going through this process. It’s not what anyone wanted. But any time we have change, we have the opportunity to re-envision.”

“Best case scenario, the new owners will look for ways to revolutionize the business and boost the health of that tier. Worst case scenario, we’ll see tighter controls on product availability. Either way, our publishing plans remain unaffected.”

Asmadi Games owner Chris Cieslik, who distributes games through Alliance, was also upbeat about the company’s potential future under Universal.

He told BoardGameWire, “We’ve been doing business with Alliance for a long time, and Universal for the last few years. Generally happy with both!

“I’m optimistic that this purchase will be a good thing, and not represent a big disruption to the industry.”