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A Big Deal in U.S. Anime

2 Feb, 2005 By: Edwin De La Cruz

Dragon Ball Z

Navarre Corp.'s recently announced acquisition of Funimation Productions for what could be as much as $150 million in cash, stock and incentives, may be the largest ever acquisition of an anime studio in the United States home video industry.

Funimation, based in Fort Worth, Texas, is one of the leading distributors and licensors of Japanese animation that include “Dragon Ball Z,” “Yu Yu Hakusho” and “Full Metal Alchemist.” The deal includes the acquisition of the online Funimation Store.

For the years ended Dec. 31, 2001, 2002 and 2003, Funimation had net revenue of $49.8 million, $63.7 million and $81.6 million, respectively.

Navarre provides distribution and related services to developers and retailers of home entertainment software. The company operates through two business divisions: distribution services, which includes PC software, video games, music and DVD; and Encore, a software publishing division in the PC CD-ROM market.

Eric Paulson, chairman and CEO of Navarre, said the Funimation deal “... reflects the ongoing execution of our strategy to utilize the strong underlying asset of our distribution business to support and assist in the growth of our higher-margin publishing business.”

Navarre hopes to increase the value of the Funimation property by leveraging Navarre's client-specific delivery systems that allow its product lines to be distributed to more than 18,000 retail locations throughout North America.

In addition to the home video distribution of its proprietary content, Funimation has successfully developed a strong catalog of product, largely due to its third-party acquisitions, marketing, sales and distribution agreements with content providers.

Funimation also acquires master licenses to properties through long-term arrangements and leverages this proprietary content into various revenue streams, such as television broadcast, VHS and DVD home videos, toys, video games and trading cards.

“Funimation will bring new business skills of international licensing and brand development,” Paulson said.

Up until this acquisition, Goldhil Home Media had been Funimation's primary distributor, but industry insiders speculated whether the relationship will continue. This could not be confirmed by press time.

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