Chaos escalates in Alliance Game Distributors sale as winning bidder scraps deal, sues owner Diamond Comics, claiming it hid that AGD had lost biggest customer Wizards of the Coast

Chaos continues to engulf the sale of one North America’s biggest tabletop gaming distributors, Alliance Game Distributors, after the winning bidder scrapped its deal and sued bankrupt AGD owner Diamond Comics for the second time in three weeks – this time claiming Diamond concealed from it that AGD had lost its biggest customer, Wizards of the Coast.

The lawsuit throws into further disarray an auction process which initially looked to have been settled on March 25, when Nasdaq-listed Alliance Entertainment (AENT) – a major distributor of music, movies, toys and consumer electronics – became the winning bidder for the vast majority of Diamond’s assets, including AGD.

Diamond, which built itself into an almost monopolistic position in comic book distribution across close to 40 years, had filed for bankruptcy protection in January while owing tens of millions of dollars to a long list of creditors.

AENT won the auction for the vast majority of Diamond’s assets, including AGD, with a bid of $72.2m – beating out a rival joint bid from Canadian board game, TCG and comics distributor Universal Distribution and WizKids owner Ad Populum, who had offered $69.1m.

But less than two weeks later the deal was plunged into turmoil when it emerged Diamond was attempting to sideline AENT in order to instead sell its assets to Universal and Ad Populum, who had been named as back-up winners of the auction.

AENT sued Diamond for acting in bad faith and conducting the auction “in a manner that was unfair to any party other than their preferred purchaser”.

Three days later AENT’s winning bid was approved by the bankruptcy court and the lawsuit cancelled – but by April 25 the deal was off again, with AENT terminating the process and Diamond releasing a statement to say it had “pivoted to alternative, exceptionally well-known purchasers who are excited to partner with us”.

Diamond chief restructuring officer Robert Gorin said on Friday, “These companies have strong balance sheets and, importantly, unmatched presence and experience in our core industries. We are finalizing purchase agreements with these third parties and expect to announce the identities of these purchasers and seek court approval very shortly to complete the sale transactions.”

Those new purchasers are believed to be Universal and Ad Populum – but the saga took another twist yesterday after AENT sued Diamond for a second time, claiming it had fraudulently misrepresented AGD’s relationship with Wizards of the Coast – the company’s biggest vendor, accounting for about 25% of its $161m annual revenue.

The lawsuit claims Diamond “repeatedly and intentionally” asserted that AGD’s relationship with WotC “remained strong and in good standing” – when in fact WotC had told Diamond last December that it would not renew its distribution agreement beyond the end of 2024, aside from a 90-day extension to aid with the bankruptcy proceedings.

AENT claims Diamond kept this a “closely guarded secret” during and after the auction, redacting termination dates from WotC documents disclosed to AENT during the process.

The suit alleges that when the true nature of WotC’s cancelled agreement came to light via unredacted documents on April 17, Diamond “feigned outrage”, calling the termination “shocking”, “coming out of nowhere” and a “slap in the face” given its 25-year relationship with WotC.

AENT’s filing claims Diamond’s falsehoods were finally laid bare on April 21 during a video call between the pair and WotC, with the latter reportedly confirming Diamond were aware of the termination last December, and adding that it was due to WotC’s business with them having declined more than 8% over the past four years – despite rising sales from WotC’s four other distributors.

The lawsuit says AENT tried to salvage the WotC relationship by paying the company an unspecified fixed sum and agreeing to minimum purchase commitments – an offer WotC rejected.

AENT claims that it had subsequently attempted to continue with its purchase at a new price it said represented the loss of WotC’s business, but says Diamond “refused to engage in those discussions”.

The lawsuit alleges that in addition to defrauding AENT and costing it millions in fees and expenses across the auction process, Diamond is refusing to return AENT’s $8.5m deposit.

It also purports to show the worsening financial situation at Diamond, saying the company’s accounts payable – its short-term debt and liabilities – had increased by about $16m since Diamond filed for bankruptcy protection on January 14.

Four Alliance Game Distributors customers BoardGameWire spoke to said there had been no negative impact on their orders or payments during the auction process, although one pointed out that the payments were court-mandated through Diamond’s $44.7m debtor-in-possession loan provided by JP Morgan as part of the bankruptcy proceedings.

Renegade Game Studios is a guarantor on that financing, having entered the arrangement due to Diamond founder Steve Geppi being a part owner at the HeroScape and Axis & Allies publisher.

Renegade founder Scott Gaeta told the Board Games Insider podcast last month that the guarantor arrangement would be over when the debtor-in-possession loan is paid back after Diamond is purchased, which at that point was expected to take place on April 10.

Alliance Game Distributors 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 had 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.

AGD says it stocks about 15,000 unique products, which it provides to more than 3,000 independent hobby retailers across North America.

BoardGameWire has reached out to senior executives at both Alliance Entertainment and Universal Distribution, and will update this story if we receive a response.