Navarre Investigating Potential Sale of FUNimation
Published by 27 May 2010, 10:52 AM EDT

Navarre announced this morning that it is considering the sale of FUNimation. Nothing has been decided just yet, but they have brought on Houlihan Lokey (an international investment bank and corporate adviser) to assist in the investigation and possible deal. Per their official press release:

MINNEAPOLIS, May 27, 2010 (GLOBE NEWSWIRE) — Navarre Corporation (Nasdaq:NAVR) a publisher and leading distributor of computer software, home entertainment media and related products, today announced that it has engaged Houlihan Lokey to assist it in structuring and negotiating a potential transaction for the sale of FUNimation Entertainment. There can be no assurances that this process will result in the consummation of a transaction.

“Navarre is pursuing a more focused strategy. Now that we have substantially reduced debt and improved operating margins, we are focusing our efforts on driving revenue, particularly in new product lines. We are concentrating all efforts on our distribution and software publishing businesses where we have significant expertise and considerable systems and physical assets that can be leveraged. The Punch! acquisition announced last week strengthens our software publishing business and demonstrates a step in our execution of this strategy,” stated Cary L. Deacon, Chief Executive Officer.

FUNimation Entertainment’s strategy and capital requirements are distinctly different from those of the Company’s core business. While FUNimation’s recent results have generally met expectations, the strategies required to grow the business include co-productions of original anime content, social networks and digital broadcasting. The Company anticipates that those plans are best executed with ownership that has assets or expertise in those areas.

This is a very interesting development both from the general business perspective of Navarre, as well as the domestic anime industry (and therefore, most specifically for us, the treatment going forward of the Dragon Ball franchise).

There are some confusing and back-handed statements flying back and forth — FUNimation did incredibly well for Navarre, helped get them out of debt, and now they want to sell them off? It is very possible that their statements should just be taken at face-value, and that where FUNimation is heading with all of their new initiatives just does not line up with what Navarre is equipped to handle and support as their core business.

Navarre completed their acquisition of FUNimation in May 2005. Since then, FUNimation has dominated the North American anime industry, with Dragon Ball proving to be one of their biggest assets time and time again. In June 2009, it was heavily implied that Dragon Ball accounted for 46% of the company’s revenue that fiscal year. At the same time, FUNimation has gone through several rounds of restructuring; however, this was expected during the recent economic recession.

FUNimation recently extended their license for the Dragon Ball franchise through 2015. If there is to be a sale of FUNimation, one would assume that the license would stay with them, but it will be interesting to see if any further re-negotiations must be made.

We should hear more about this news next week as Navarre releases their fiscal end-of-year report and provides a little more outlook for the future.

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