The maker of the iconic Slinky has made an offer to purchase Fundex Games Ltd., the Plainfield-based company seeking to reorganize its assets under the protection of bankruptcy.
Fundex, which filed Chapter 11 in September, said in court documents that Plymouth, Mich.-based Poof-Slinky Inc. so far is the only potential purchaser that has shown interest in acquiring the company’s assets.
If another bid is received, an auction will be conducted Dec. 19 to determine the buyer, said KC Cohen, the company’s bankruptcy attorney.
Cohen declined to divulge Poof-Slinky’s offer but said, “if that’s the only bid, you don’t have a lot of leverage.”
“Somebody’s got to set the floor,” Cohen said of Poof-Slinky’s offer. “You do everything you can to stoke the marketplace.”
Closing the transaction before the end of the year is critical to Fundex’s future because the company does not have sufficient operating capital to continue beyond December, Fundex said in a court filing.
The company’s bankruptcy represents a steep fall for the company that once had 50 employees, offices in Hong Kong and New York, and was the sole distributor of the industry’s second-most-popular card game, Phase 10.
Fundex’s other popular games include Gnip Gnop and What’s in Ned’s Head? What’s in Ned’s Head, which lets children pull items like moldy cheese, fake vomit and a rat from a stuffed head’s orifices, won a slew of awards and helped make Fundex a growing player in the game industry.
Just two years ago, Fundex boasted annual revenue of $25.8 million, according to court documents. The amount, however, fell by nearly half, to $13.3 million, in 2011, and at the time of the bankruptcy filing, the company had recorded a paltry $2.6 million in sales.
Fundex listed assets of nearly $1.5 million and liabilities of $8.9 million.
Some of the drop in sales likely can be attributed to its loss of Phase 10, whose owner is still trying to collect on royalties as part of a settlement agreement it signed with Fundex in October 2010.
The battle over the game began in December 2008 when Michigan inventor Kenneth Johnson accused Fundex of copyright infringement, trademark dilution, fraud, conversion and theft in a case filed in U.S. District Court in Indianapolis.
Phase 10, now distributed by Mattel, was a cash cow for Fundex, selling more than 3 million copies per year, second only to Uno.
The rummy-like game was the company’s first product when company President Chip Voigt and his father, game industry veteran Pete Voigt, launched Fundex in 1986.
Poof-Slinky, meanwhile, already is quite familiar with Fundex. On Sept. 7, the same day it filed for bankruptcy protection, Fundex signed a contract to switch its product distribution from San Francisco-based University Games Corp. to Poof-Slinky.
A sale to Poof-Slinky would represent the best result for creditors, Fundex said in a court filing, given the likelihood that any reorganization plan would require “substantially more operating net revenue than the debtor can reasonably predict it will generate.”
In addition to making the Slinky, Poof-Slinky is a leading manufacturer of foam sports balls. Its brands include Cadaco, Educational Design Toys and Ideal, which makes a variety of table-top and board games.
Poof-Slinky says its products are sold in more than 35,000 retail outlets. The company operates manufacturing plants in Michigan and Pennsylvania, and has more than 125 employees.