The owner of the company that makes the iconic Slinky has agreed to purchase bankrupt Fundex Games Ltd. at a price more than double its original bid of $800,000.
Propel Equity Partners, the parent of Plymouth, Mich.-based Poof-Slinky Inc., will pay $1.7 million for Plainfield-based Fundex in addition to 1 percent of its sales for the next 24 months, according to the settlement announced at a Thursday morning court hearing.
Interest in Fundex escalated during a court-ordered auction Wednesday in which a surprise bidder, Philadelphia-based discount chain Five Below, surfaced, driving up the price of Fundex to the delight of some creditors. Fundex has about $9 million in secured and unsecured debts.
“To suggest that it was a spirited bidding contest would be a vast understatement,” said K.C. Cohen, Fundex’s attorney. “We’re obviously grateful for Five Below showing up, but I still can’t figure out what they were doing there.”
The price Poof-Slinky paid for Fundex more than doubled the original $800,000 bid Greenwich, Conn-based Propel made earlier this month following Fundex’s attempt in September to reorganize its assets under the protection of bankruptcy.
Fundex’s bankruptcy represents a steep fall for the company that once had 50 employees and 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 remove fake items like moldy cheese, 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. Revenue, however, fell by nearly half, to $13.3 million, in 2011. At the time of the bankruptcy filing, the company had recorded a paltry $2.6 million in sales in 2012.
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 was 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.
The sale of Fundex is “a little bittersweet,” Chip Voigt said following the court hearing.
“It’s the end of a tough journey,” said Voigt, adding that he’s in discussions with the buyer on a potential future with Poof-Slinky.
Poof-Slinky already is quite familiar with Fundex. On Sept. 7, the same day it filed for bankruptcy protection, Fundex signed a contract to switch product distribution from San Francisco-based University Games Corp. to Poof-Slinky.
Poof-Slinky’s CEO, Ray Dallavecchia, has known Chip Voigt for years, said Robert Farinholt, a partner of Propel Equity Partners.
“Fundex is very complementary to our existing business,” Farinholt said. “We’re essentially thrilled to add [the games] to our existing product portfolio.”
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.