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Gen Con "sale" actually hostile takeover attempt

November 26th, 2008: Allan Sugarbaker says...
Gen Con "sale" actually hostile takeover attempt

Those of you who’ve been following the comments of the already know, but it’s worth repeating in the main news feed: according to Adrian Swartout, President of Gen Con LLC, the “Gen Con Acquisition Group” that filed a letter of intent to buy Gen Con – well, that’s most likely a hostile takeover attempt in progress. In a press statement earlier today, Swartout had the following to say about the Gen Con Acquisition Group letter:

“We believe this offer was clearly timed to disrupt our ability to get a plan confirmed and is an attempt at a hostile takeover with the intention of ousting Peter Adkison as the owner.

The offer was suspiciously cryptic, with no letter of introduction, good will, or summary of intentions for forward management and opportunities for current staff. Given the date of submission, the lack of prior outreach from this group, and the overt omission of intentions regarding management of business operations, it was difficult to take this offer seriously. It’s from an anonymous group that clearly does not understand the value Peter brings to Gen Con. Any acquisition offer that relies on future profits of the business to service the outstanding debt that does not have a provision for Peter’s continued involvement is not a sound offer.

[…] I have diligently reviewed the offer in conjunction with our creditor committee and we have determined it is a high risk proposition with far too many negative implications and is not in the best interest of our creditors. It is our intent to disregard this offer and continue toward confirmation of a plan substantially similar to the offer filed with the Court.”

It seems unlikely that this is the last we’ve heard of the Gen Con fiscal recovery situation. We’ll keep you posted if we hear anything else.

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One comment

  1. Torquemada says:

    From ICv2:

    “Anthony Gallela, former (and current acting) Executive Director of GAMA, will lead the company formed to run Gen Con if the efforts of the Gen Con Acquisition Group are successful, he told ICv2 on Tuesday. “The investors are all outside the industry, very well funded, and can support the offer, and support Gen Con’s growth and development and continuation,” Gallela said. Gallela is also currently the VP-Sales and Marketing of Bucephalus Games (see “Gallela Leaving GAMA Executive Director Post”).

    The offer from the Gen Con Acquisition Group came in on the eve of the filing of Gen Con’s final plan for emergence from bankruptcy (see “Eleventh Hour Offer for Gen Con”), and was subsequently rejected by Gen Con (see “Gen Con’s Adrian Swartout on New Offer”).

    We asked Gallela why he thought the GAG’s offer was superior to Gen Con’s plan for emerging from bankruptcy. “The success and strength of Gen Con is very important to me, and to the rest of the industry, and to the fans,” he said. “So for me, the best thing for Gen Con is to have solid fiscal backing and the experience at the top of organization that can ensure that it continues in the best possible way.”

    Gallela said that the GAG group would invest over a million dollars “to satisfy the debt and invest in the future.” Gen Con’s creditors would be paid faster under the GAG’s plan than they would under Gen Con’s plan.

    And he reached out to current Gen Con management, saying of Gen Con President Adrian Swartout, “Adrian has done yeoman’s work with Gen Con, and if things can be worked out we would want her to continue on,” he said.

    Asked about the role of current Gen Con owner Peter Adkison, Gallela stressed his respect for Adkison and his appreciation for his success in other areas. But when it came to Gen Con, Gallela felt the show could do better. “Peter is an innovator and has been a longtime friend of mine,” Gallela said. “That doesn’t mean that he’s as good as Adrian or me at running a convention for game enthusiasts…. I think Peter is right for Hidden City Games, but I don’t think he’s right for Gen Con. I would have to assume he feels the same since he hasn’t been involved with running the show for two years.”

    We asked Gallela what changes he would make in the way Gen Con operates. He noted the potential for expense reductions and expansion of positive aspects of the show, without more specifics. “For the fans, I don’t see substantial changes other than that the things that annoy them would be improved and the things they like would be more plentiful,” he said. Indianapolis would continue to be the show’s venue.

    Gallela said that he knew of support for and interest in the GAG’s offer among the creditors, although he said he hadn’t “taken a straw poll.” “We have spoken to a number of the creditors, and our counsel has been talking to some of the creditors’ counsels,” he said.

    We asked whether GAMA’s board was aware of his involvement in the acquisition group, and he indicated that it was, and that his efforts began as GAMA declined to make an offer. “GAMA did look at Gen Con because of its concern over the potential demise of one of the most important events in our industry,” he said. “GAMA did not want Gen Con to go away. But GAMA decided not to be involved in a hostile takeover, and that Gen Con would continue on whether run by Gen Con or an investment group.”

    Gallela’s role as ED of GAMA was what led to the first conversations with Gen Con’s Swartout. “I did talk to Adrian some time ago in my capacity as GAMA ED and did bring up a lot of the concerns of GAMA and different industry pundits and members,” he said. “I had a talk with her about our plans and Gen Con’s plans. I also let her know there was the possibility of another offer. I also had a few meetings with Peter, keeping him appraised on the issues around the bankruptcy, and I let him know there was going to be another offer.”

    The investment group is not open to keeping Adkison in as an equity owner, although Adkison “would gain the paybacks given to Hidden City that have been paid already,” Gallela said.

    “We plan to work with Gen Con, and work with Adrian, and work with Peter to do the best thing for all involved.”

    The next step appears to be a reconsideration of the Gen Con Acquisition Group offer by Gen Con’s management, acting as debtor-in-possession. The creditors committee and the judge could also weigh in. Developing.”

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