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As filed with the Securities and Exchange Commission on March 11, 1999
Registration Statement No. 333-68019
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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MARVEL ENTERPRISES, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-3711775
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
387 Park Avenue South
New York, New York 10016
(212) 696-0808
(Address, Including Zip Code and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
Morton E. Handel
Chairman of the Board
387 Park Avenue South
New York, New York 10016
(212) 696-0808
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
--------------------
copy to:
John N. Turitzin, Esq.
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
(212) 856-7000
Approximate date of commencement of proposed sale to public: From
time to time or at one time after the effective date of this registration
statement as determined by market conditions.
If the only securities being registered on this form are being
offered pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
782128.4
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Prospectus
MARVEL ENTERPRISES, INC.
36,642,683 Shares of Common Stock
15,620,234 Shares of 8% Cumulative Convertible
Exchangeable Preferred Stock
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All of the shares of stock covered by this prospectus are owned by
the stockholders listed in the section of this prospectus called "Selling
Stockholders." The selling stockholders may sell any or all of their shares from
time to time. The sales prices, and the methods of determining those prices, are
yet to be determined. We will not receive any of the proceeds of sales by the
selling stockholders.
The common stock is listed for trading on the New York Stock Exchange
under the symbol "MVL". The preferred stock is not listed for trading on any
national securities exchange or on the Nasdaq Stock Market.
See "Risk Factors" beginning on page 5 for certain factors relevant
to an investment in our common stock and/or preferred stock.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or passed
upon the adequacy or accuracy of this prospectus. Any representation to the
contrary is a criminal offense.
March 11, 1999
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TABLE OF CONTENTS
Page
Prospectus Summary...........................................................3
Risk Factors.................................................................5
Ratio of Combined Fixed Charges and
Preference Dividends to Earnings.........................................11
Forward-Looking Statements..................................................11
Federal Income Tax Considerations...........................................12
Use of Proceeds.............................................................16
Selling Stockholders........................................................16
Plan of Distribution........................................................21
Where You Can Find More Information.........................................22
Experts.....................................................................23
Legal Matters...............................................................23
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PROSPECTUS SUMMARY
Because this is a summary, it does not contain all the details that
may be important to you. You should read this entire prospectus carefully before
you invest.
About Marvel Enterprises, Inc.
We are an entertainment company. We operate in the licensing, comic
book publishing and toy businesses. We own the copyrights to over 3,500
fictional characters, including Spider-Man, X-Men, Captain America, Fantastic
Four and The Incredible Hulk.
Our company was called "Toy Biz, Inc." until October 1, 1998. On that
day, we acquired Marvel Entertainment Group, Inc., which had been in bankruptcy
since December 1996, and changed our name to Marvel Enterprises, Inc. When we
use the term "Marvel Entertainment" in this prospectus, we are referring to
Marvel Entertainment Group. Our acquisition of Marvel Entertainment was part of
a plan of reorganization for Marvel Entertainment that was proposed, and
ultimately confirmed by the court, in Marvel Entertainment's bankruptcy case.
We operate through the following three business divisions:
1. Marvel Licensing. Marvel Licensing licenses our characters for use
in television programs, motion pictures, destination-based entertainment (such
as theme parks), on-line media, and other consumer products.
2. Marvel Publishing. Marvel Publishing is one of the world's leading
publishers of comic books. We believe that our characters are among the oldest
and most recognizable in the entertainment industry. Marvel Publishing has
published comic books based upon our characters for over 60 years, including
some of the world's most popular comic book titles.
3. Toy Biz. Toy Biz designs, develops, markets and distributes both
innovative and traditional toys in the United States and internationally. Our
toy products fall into three categories: toys based on our characters,
proprietary toys designed and developed by us, and toys based on properties
licensed to us by third parties.
We sold our Fleer/SkyBox sports and entertainment trading card
business in February 1999. We intend to dispose of our Panini activity stickers
and adhesive paper business in 1999.
Our executive offices are located at 387 Park Avenue South, New York,
New York 10016 and our telephone number is (212) 696-0808.
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Securities to be Offered
This prospectus relates to the offer and sale of two types of stock
in Marvel Enterprises: our common stock and our 8% cumulative convertible
exchangeable preferred stock, which is the formal name of the preferred stock
covered by this prospectus. Each share of preferred stock:
o is entitled to receive dividends, at the rate of 8% per year,
in cash or in additional shares of preferred stock;
o can be converted by its owner into 1.039 shares of common
stock;
o votes generally with the common stock as one class;
o has the same voting power as 1.039 common shares when it votes
with the common stock;
o can be converted into common stock by Marvel Enterprises
beginning on October 1, 2001 if the trading price of the
common stock is above a certain dollar amount; and
o can be repurchased by Marvel Enterprises for $10 beginning on
October 1, 2001.
Federal Income Tax Considerations
See "Federal Income Tax Considerations," which discusses certain U.S.
Federal income tax consequences that may result from the purchase of the common
stock or the preferred stock offered by this prospectus.
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RISK FACTORS
You should consider carefully the following risk factors together
with all of the other information included or incorporated by reference in this
prospectus before you decide to purchase shares of our common stock or preferred
stock. This section includes or refers to certain forward-looking statements.
You should refer to the explanation of the qualifications and limitations on
such forward-looking statements discussed on page 11 of this prospectus.
Our indebtedness is substantial and it could hurt our financial health.
We have a lot of indebtedness, which presents a risk to our
stockholders that our financial health will suffer. Our indebtedness consists of
$250 million of senior notes due 2009 that we issued in February 1999 and a
guarantee of $27 million of the indebtedness of Panini, S.p.A. In addition, we
expect to be able to borrow at least $50 million under a new credit facility.
The amount of our indebtedness could have important consequences to
holders of our common stock and preferred stock, including, but not limited to,
the following:
o our ability to borrow money or sell stock when we want to for
working capital, capital expenditures, acquisitions, general
corporate or other purposes may be limited;
o a substantial portion of whatever cash we make from our
business will be needed to pay the principal of, and interest
on, our indebtedness, which will reduce the funds available to
operate our business;
o our ability to develop our business and expand may be limited
by the indenture governing the senior notes or by our other
loan agreements; and
o our indebtedness may make us more vulnerable to economic
downturns, limit our ability to withstand competitive
pressures and reduce our flexibility in responding to changing
business and economic conditions.
Our ability to pay dividends on the preferred stock, to pay interest
on the senior notes, to repay our future lenders and to operate and grow our
business will depend on our operating success, which could be affected by many
factors, including general economic conditions and other factors beyond our
control. If we do not fulfill the promises that we made in the indenture
governing the senior notes, or the promises that we make in other loan
agreements, the noteholders or our other lenders could demand that we pay back
all the money we owe them under those agreements immediately. It is possible
that the cash we generate by operating our business, together with borrowings
expected to be available under a new working capital facility, if obtained, will
be too little to make required payments under the indenture and other loan
agreements and to cover our other cash requirements. In that case, we would need
to renegotiate those agreements, to refinance our indebtedness or to obtain
additional financing; but we might be unable to do so.
We may need additional financing but be unable to obtain it.
We may need a new working capital facility but be unable to obtain
it. Even if we obtain a new working capital facility, its terms will probably
require us to comply with various financial and other covenants in order to
borrow money. We failed to comply with similar covenants under the revolving
credit facility that we obtained on October 1, 1998 (which we terminated in
February 1999). If we do not obtain a satisfactory new working capital facility,
or if we are otherwise unable to obtain any additional funds, it could
significantly harm us.
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Our financing agreements limit our operating flexibility.
Both the indenture that governs the senior notes and a new secured
working capital facility, if obtained, will constrict us in ways that may limit
our financial success. For instance, they will limit our ability to:
o incur additional indebtedness;
o incur liens;
o pay dividends, make investments or make some types of
payments;
o consummate some types of asset sales;
o enter into some types of transactions with affiliates;
o merge or consolidate with any other person; or
o sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of our assets.
If we obtain a new secured working capital facility, it will probably
require us to satisfy various financial tests. Events beyond our control might
cause us to fail those tests. If we fail any of the tests, our new working
capital facility lenders will have the right to demand that we pay back all the
money we owe them at once. If we are unable to repay the money, those lenders
might be entitled to sell substantially all our assets, which we expect will be
pledged to the lenders to secure our debt.
Because a significant portion of our assets are intangible, we might not have
any assets left for stockholders after a foreclosure by creditors.
Because a significant portion of our assets are intangible, holders
of our common and even our preferred stock might be entitled to nothing after a
foreclosure by our secured creditors. Our intangible assets consist of
copyrights, trademarks, licenses, goodwill and other intangibles. These assets
comprised $487.7 million of our $689.9 million of total assets at December 31,
1998, resulting in negative tangible net worth of $304.1 million. The value of
these assets could be reduced materially in the future by changing consumer
preferences, our failure to implement our business strategy, competition and
other future trends. As a result, our assets may not be sufficient to repay all
of our indebtedness if secured creditors foreclose on the assets pledged to them
or if we are forced to dispose of our assets to meet our obligations.
We might not be able to integrate the businesses of Marvel Entertainment and Toy
Biz.
Our future success will depend in part on our ability to integrate
effectively the businesses of Toy Biz and Marvel Entertainment. This process may
require a disproportionate amount of time and attention of our management,
financial and other resources. Although we believe that we have the opportunity
for synergies and cost savings, the timing or amount of synergies or cost
savings that may ultimately be attained is uncertain. Some of the anticipated
benefits of the combination may not be achieved if our operations are not
successfully integrated in a timely manner. The difficulties of that integration
may initially be increased by the necessity of coordinating and integrating
personnel with different business backgrounds and corporate cultures. We might
not be able to integrate effectively Toy Biz's and Marvel Entertainment's
operations. If we are not successful in this combination, if the combination
takes longer than anticipated, or if the integrated operations fail to achieve
market acceptance, our business could be adversely affected. In addition,
implementation of our business strategy will be subject to numerous other
contingencies beyond our control, including, among others, general and regional
economic conditions, interest rates, competition, and the ability to attract and
maintain skilled
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employees. As a result, the combination might not be successful, our business
strategies might not be effective and we might not be able to achieve our goals.
There have been declines in many of our lines of business in recent periods.
In recent years there has been a decline in many of our businesses,
and that decline may continue. In 1995 and 1996, there was an overall decline in
Marvel Entertainment's core publishing business, its licensing business and its
sports and entertainment trading card business which had a material adverse
effect on Marvel Entertainment. This decline, along with the substantial
indebtedness incurred by Marvel Entertainment in connection with its acquisition
program, ultimately led Marvel Entertainment to file for bankruptcy protection
in 1996. Marvel Entertainment's publishing revenues, along with those of the
overall comic book industry, declined primarily as a result of reduced
readership, lower speculative purchases and lower selling prices, which in turn
caused a contraction in the number of comic book specialty stores. These store
closings further hurt Marvel Entertainment's net publishing revenues. In 1997
and 1998, Marvel Entertainment's publishing revenues continued to decline due to
these reasons and Marvel Entertainment's decision to eliminate unprofitable
comic book titles. We do not expect publishing revenues to return to
pre-bankruptcy levels.
Marvel Entertainment's licensing revenues declined significantly from
pre-bankruptcy levels. These revenues decreased from $54.7 million in 1995 to
$15.1 million in 1998. Our licensing revenues might never reach Marvel
Entertainment's pre-bankruptcy levels.
The bankruptcy of Marvel Entertainment also caused a decline in our
toy business because a substantial portion of our toy products were based on
characters licensed to us by Marvel Entertainment. Our toy business might not
return to its pre-bankruptcy levels. In addition, during the fourth quarter of
1998, our operations were hurt by the decision of Toys 'R' Us, one of our major
customers, to significantly reduce its toy inventory levels.
Our net toy sales were $221.6 million, $150.8 million and $212.4
million in 1996, 1997 and 1998, respectively, while our toy operating income
(loss) was $27.2 million, $(49.3) million and $(18.7) million, respectively, for
those periods. Marvel Entertainment's revenues (including the Fleer/SkyBox
sports and entertainment trading card and Panini activity sticker and adhesive
paper businesses) were $745.5 million, $471.7 million and $273.5 million in
1996, 1997 and the nine months ended September 30, 1998, respectively, while its
operating loss was $(386.3) million, $(191.4) million and $(2.3) million,
respectively, for those periods.
We believe that the sales and the profitability of each of our
businesses have been hurt by concerns about the effect of Marvel Entertainment's
bankruptcy proceedings among customers and others with whom we do business.
While we believe that the consummation of Marvel Entertainment's plan of
reorganization has alleviated these concerns, our sales and profitability might
continue to be adversely affected.
Our customer base for toys is concentrated.
Like other toy makers, we are dependent upon toy retailers and mass
merchandisers to distribute our products. The retail toy business is highly
concentrated. The five largest customers for our toy products accounted in the
aggregate for approximately 66% of our total toy sales in 1998. An adverse
change in, or termination of, our relationship with one or more of our major
customers could have a material adverse effect on us. In recent years, the
retail chain store industry, and the toy retail industry in particular, have
undergone significant consolidation. To the extent that this consolidation
continues, our distribution base could shrink, thereby concentrating an even
greater percentage of our sales in a smaller number of retailers and increasing
the remaining toy retailers' ability to negotiate more favorable terms and
prices from us.
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Toy retailers' inventory management systems could cause us to produce the wrong
amount of toy products.
Each of our five top toy customers uses, to some extent, inventory
management systems which track sales of particular products and rely on reorders
being rapidly filled by suppliers like us, rather than on large inventories
being maintained by the retailers themselves. These systems increase pressure on
us to fill orders promptly. The systems also shift a portion of retailers'
inventory risk onto us. Our production of excess products to meet anticipated
retailer demand could result in markdowns and increased inventory carrying costs
for us on even our most popular items. For instance, we believe that our
operations were negatively impacted in the fourth quarter of 1998 by the
decision of Toys 'R' Us, one of our major customers, to significantly reduce its
toy inventory levels. If we fail to anticipate a high demand for our products,
however, we face the risk that we may be unable to provide adequate supplies of
popular toys to retailers in a timely fashion, particularly during the Christmas
season, and may consequently lose sales.
We are vulnerable to changing consumer preferences.
Our new and existing toy products are subject to changing consumer
preferences. Most of our toy products can be successfully marketed for only a
limited period. In particular, toys based on feature films are in general
successfully marketed for only a year or two following the film's release.
Existing product lines might not retain their current popularity or new products
developed by us might not meet with the same success as our current products. We
might not accurately anticipate future trends or be able to successfully
develop, produce and market products to take advantage of market opportunities
presented by those trends. Part of our strategy is to make toys based on the
anticipated success of feature film releases and TV show broadcasts. If these
releases and broadcasts are not successful, we may not be able to sell these
toys profitably, if at all. In addition, we derive a substantial portion of our
revenues from a limited number of popular toys. In particular, we expect
products based on our World Championship Wrestling license to generate a
significant portion of our operating income during the next several years. If
these products are not successful, it could have a material adverse effect on
us.
We depend on toy manufacturers in China.
A large number of our toy products are manufactured in China, which
subjects us to risks of currency exchange fluctuations, transportation delays
and interruptions, and political and economic disruptions. Our ability to obtain
products from our Chinese manufacturers is dependent upon the United States'
trade relationship with China. The "most favored nation" status of China, which
is reviewed annually by the United States government, is a regular topic of
political controversy. The loss of China's "most favored nation" status would
increase the cost of importing products from China significantly, which could
have a material adverse effect on us. The imposition of further trade sanctions
on China could result in significant supply disruptions or higher merchandise
costs to us. We might not be able to find alternate sources of manufacturing
outside China on acceptable terms even if we want or need to. Our inability to
find those alternate sources could have a material adverse effect on us.
We purchase goods from manufacturers in China mostly in Hong Kong
dollars and, accordingly, fluctuations in Hong Kong monetary rates may have an
impact on our cost of goods. In recent years, the value of the Hong Kong dollar
has been tied to the value of the United States dollar, eliminating fluctuations
between the two currencies. The Hong Kong dollar, however, might not continue to
be tied to the United States dollar. Furthermore, appreciation of Chinese
currency values relative to the Hong Kong dollar could increase our cost of
products manufactured in China and harm our business.
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Our toy business is seasonal.
Our annual operating performance depends, in large part, on our sales
of toys during the relatively brief Christmas selling season. Unlike many
industries, the toy industry tends to be seasonal. During 1996, 1997 and 1998,
64%, 67% and 60%, respectively, of our domestic net toy sales were realized
during the second half of the year. We expect that our toy business will
continue to experience a significant seasonal pattern for the foreseeable
future. This seasonal pattern requires significant use of working capital mainly
to build inventory during the year, prior to the Christmas selling season, and
requires accurate forecasting of demand for our products during the Christmas
selling season. We are seeking to obtain a new working capital facility;
however, that facility is not yet in place, and we might not obtain it. The
failure to obtain a working capital facility could have a material adverse
effect on our business.
We must often make advance payments and guarantee royalties under licenses that
we acquire.
When we obtain licenses from others to manufacture products based on
their characters, we are often required to pay significant non-refundable
advances or to guarantee significant minimum royalty payments without knowing
whether the characters will be popular. If a character does not turn out to be
popular, the non-refundable advances and guaranteed minimum royalties might
cause us to lose a significant amount of money on the license.
We depend on a single direct market comic book distributor.
We distribute our comic book publications to the direct market
through the only major comic book distributor. The direct market accounted for
approximately 81% of Marvel Publishing's net publishing revenues in 1998. As a
result, a termination of our agreement with that distributor could significantly
disrupt our publishing operations. Our agreement with the distributor is for a
term of three-and-a-half years and automatically renews for succeeding one-year
periods unless terminated by either party. Either party also has the right to
terminate upon the happening of certain events. We believe that the termination
of the current distribution agreement would not have a long-term material
adverse effect on us.
The outcome of stockholder votes is controlled by a small number of
stockholders.
A majority of the voting power of our stock is held by a small number
of stockholders, who can determine the outcome of most stockholder votes. In
addition, holders of over 60% in voting power of our stock have entered into a
stockholders' agreement with us. The stockholders' agreement provides, among
other things, that its parties shall nominate and vote in favor of each other's
designated members of our board of directors. Other stockholders, therefore,
have little or no ability to select our directors while the stockholders'
agreement is in effect.
Holdings of preferred stock are highly concentrated in a small number of
holders.
A significant portion of the outstanding shares of preferred stock
are held by a relatively small number of stockholders. Sales of a large number
of the outstanding shares of preferred stock at once, or within a limited period
of time, might have a significant negative effect on the price an investor could
otherwise expect to receive for shares of preferred stock.
There is no active trading market for the preferred stock.
There is currently no active trading market for the preferred stock.
It is possible that an active trading market in the preferred stock will not
develop and that purchases of the shares of preferred stock offered by this
prospectus will be an illiquid investment.
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Dividends paid in kind on the preferred stock may cause preferred stockholders
to suffer tax liability without the receipt of any cash.
Holders of preferred stock may incur income tax liability without the
receipt of any cash to pay that liability. Dividends on the preferred stock may
be paid, at our option, either in cash or in additional shares of preferred
stock. Dividends paid in additional shares of preferred stock are said to be
paid "in kind." We have promised some of our lenders that we will pay dividends
only in kind for as long as we owe money to them. Dividends paid in kind may be
taxable income to holders of preferred stock even though those dividends provide
no cash to those holders with which to pay the resulting income tax liability.
We can repurchase the preferred stock.
We have the option, on thirty days' notice, to repurchase all of the
shares of preferred stock at any time after October 1, 2001 for $10 per share,
plus all accrued but unpaid dividends, whether or not the holders of preferred
stock wish us to do so.
We can require conversion of preferred stock into common stock.
If the common stock has been trading at prices above a certain dollar
amount (determined by a formula set forth in Section 6.8(g) of our certificate
of incorporation), then we will have the right, at any time on or after October
1, 2001, to force a conversion of up to $50 million worth of preferred stock at
a time into shares of common stock. Purchasers of the shares of preferred stock
offered by this prospectus therefore risk having their shares converted, against
their will, into shares of common stock.
Corporate holders of preferred stock risk loss of a tax deduction if we exchange
the preferred stock.
If we exchange the preferred stock for subordinated notes, corporate
holders of preferred stock may suffer adverse tax consequences. If a majority of
the holders of preferred stock approve, we may exchange all of the shares of
preferred stock for subordinated notes at any time after April 1, 2000. Those
notes will have substantially the same economic terms, voting rights and
conversion features as the preferred stock, but instead of receiving dividend
payments, holders of subordinated notes would receive interest payments.
Corporate holders of preferred stock therefore risk the loss of the "dividends
received" deduction in the event of our exchange of the shares of preferred
stock for subordinated notes.
We have not yet achieved Year 2000 compliance.
Through December 31, 1998, we incurred Year 2000 conversion costs for
our Toy Biz division of approximately $1.3 million and we expect to incur an
additional $1.0 million in 1999. We are utilizing both internal and external
sources to remediate, or replace, and test Toy Biz's software for Year 2000
modifications. We anticipate completing the Year 2000 project for Toy Biz by
June 30, 1999.
We are in the process of completing an assessment of Year 2000
compliance for the Marvel Licensing and Marvel Publishing operations. Marvel
Entertainment did not allocate resources to the Year 2000 project while it was
in bankruptcy, and as of December 31, 1998, we had incurred no Year 2000
conversion costs for Marvel Licensing or Marvel Publishing. We believe that we
can successfully complete the Year 2000 compliance of Marvel Licensing and
Marvel Publishing by converting their financial system into the Toy Biz
financial system. We expect to complete the conversion by August 1999. We will
also make other systems used by Marvel Licensing and Marvel Publishing Year 2000
compliant by converting them to the Toy Biz system. We estimate that the costs
to conform Marvel Licensing and Marvel Publishing will be approximately
$500,000.
The cost of the project and the date on which we believe that we will
complete the Year 2000 modifications are only estimates. We currently believe
that the Year 2000 issue will not pose significant
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operational problems for our computer systems. We have begun to communicate with
our customers and major suppliers in order to determine whether the Year 2000
issue will affect the ability of those companies' computer systems to interface
with our systems or will otherwise affect the ability of those companies to
transact business with us. We are not aware of any such material issues with our
customers and suppliers at this time. Our worst-case scenarios would be manual
performance of all accounting functions and the loss of relationships with our
major customers because of the inability of our computers to interface with
theirs. We have not developed a contingency plan to assess the likelihood of,
and to address, our worst-case scenarios. We assess our Year 2000 status
regularly and will begin to develop comprehensive contingency plans if we
believe that we will not complete the Year 2000 project in a timely manner. If
our Year 2000 project is not completed on a timely basis, or if our major
customers or suppliers fail to address all the Year 2000 issues, we believe that
it could have a material adverse impact on our operations.
RATIO OF COMBINED FIXED CHARGES AND PREFERENCE DIVIDENDS TO EARNINGS
<TABLE>
<CAPTION>
Pro Forma
1993 1994 1995 1996 1997 1998 1998
---- ---- ---- ---- ---- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Combined Fixed Charges and
Preference Dividends to Earnings 4.08 16.16 67.63 57.64 -- -- --
====================================================================================
</TABLE>
For the purposes of the ratio of combined fixed charges and
preference dividends to earnings, earnings were calculated by adding pretax
income, interest expense and the portion of rents representative of an interest
factor. Combined fixed charges consist of interest expense and the portion of
rents representative of an interest factor. For the periods in which earnings
were insufficient to cover combined fixed charges and preference dividends, the
dollar amount of coverage deficiency was $49.7 million, $31.6 million and $90.1
million for the twelve months ended December 31, 1997 and 1998 and the pro-forma
twelve months ended December 31, 1998, respectively.
FORWARD-LOOKING STATEMENTS
This prospectus may contain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 (the "Securities Act") and
Section 21E of the Securities Exchange Act of 1934. Forward-looking statements
are subject to risks and uncertainties. Those risks and uncertainties may cause
our actual results, performance or achievements to be materially different from
what is expressed or implied by the forward-looking statements. Forward-looking
statements are based on assumptions and describe our future plans, strategies
and expectations. Forward-looking statements are generally identifiable by use
of the words "may," "will," "should," "expect," "anticipate," "estimate,"
"believe," "intend" or "project" or comparable terminology. In addition to the
risks and uncertainties discussed in "Risk Factors," factors which could have a
material adverse effect on our operations and future prospects include, but are
not limited to,
o our potential inability to successfully implement our business
strategy,
o a decrease in the level of media exposure or popularity of our
characters resulting in declining revenues from products based
on those characters,
o the lack of commercial success of properties owned by major
entertainment companies that have granted us toy licenses,
o the lack of consumer acceptance of new product introductions,
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o production delays or shortfalls,
o continued pressure by certain of our major retail customers to
significantly reduce their toy inventory levels,
o the impact of competition and changes to the competitive
environment on our products and services,
o changes in technology (including uncertainties associated with
Year 2000 compliance),
o changes in governmental regulation, and
o other factors detailed from time to time in our filings with
the Securities and Exchange Commission.
These risks and uncertainties should be considered in evaluating any
forward-looking statements contained or incorporated by reference in this
prospectus.
FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of material Federal income tax matters
relating to our operations that may be relevant to our prospective stockholders.
It is based upon current law and is not tax advice. This discussion does not
address all aspects of taxation that may be relevant to particular stockholders
in light of their personal investment or tax circumstances, or to certain types
of stockholders (including, without limitation, insurance companies, tax-exempt
organizations, financial institutions, broker-dealers, foreign corporations and
persons who are not citizens or residents of the United States) subject to
special treatment under the Federal income tax laws, nor does it give a detailed
discussion of any state, local or foreign tax considerations.
Each of our prospective stockholders is encouraged to consult its own
tax advisor regarding the specific tax consequences to it of the purchase,
ownership and sale of shares of common stock and/or preferred stock of Marvel
Enterprises, Inc. ("Marvel"), including the Federal, state, local, foreign and
other tax consequences of such purchase, ownership and sale and of potential
changes in applicable tax laws.
The following discussion is a summary of certain U.S. Federal income
tax consequences expected to result from the consummation of the plan of
reorganization for Marvel Entertainment that was confirmed on July 31, 1998 by
the United States District Court for the District of Delaware (the "Plan"). This
discussion is based on the Internal Revenue Code of 1986, as amended (the
"Code"), as in effect on the date hereof and on United States Treasury
Regulations in effect (or in certain cases, proposed) on the date hereof, as
well as judicial and administrative interpretations thereof available on or
before such date. All of the foregoing are subject to change, which change could
apply retroactively and could affect the tax consequences described below. There
can be no assurance that the Internal Revenue Service (the "IRS") will not take
a contrary view with respect to one or more of the issues discussed below, and
no ruling from the IRS has been or will be sought with respect to any issues
which may arise under the Plan. This summary is for general information only and
does not purport to address all of the U.S. Federal income tax consequences that
may be applicable to Marvel. This discussion does not address state, local or
foreign tax considerations that may be applicable.
The merger by means of which Marvel acquired Marvel Entertainment
pursuant to the Plan (the "Merger") is expected to be characterized as a
transfer of the stock of Marvel Entertainment to Marvel upon which, for Federal
income tax purposes, Marvel is not expected to recognize any gain or loss.
782128.4
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The reclassification on October 1, 1998 of the two then-existing
classes of common stock of Marvel into one class of common stock is expected to
be treated as a nontaxable recapitalization of Marvel in which neither the
stockholders of Marvel nor Marvel will recognize gain or loss.
Utilization of Marvel Entertainment's Net Operating Loss Carryovers and Built-In
Losses
Section 382 of the Code imposes an annual limitation on the amount of
taxable income of a "loss corporation" that may be offset by net operating loss
carryovers ("NOLs") and certain built-in losses (referred to collectively as
pre-change loss) that are attributable to the period preceding an "ownership
change." The NOLs of Marvel Entertainment and its subsidiaries may be subject to
an existing limitation. Marvel Entertainment and its subsidiaries may also have
had a built-in loss at the time of the Merger. Upon consummation of the Plan,
Marvel Entertainment and its subsidiaries underwent an ownership change within
the meaning of section 382 of the Code. As a result, the NOLs of Marvel
Entertainment and its subsidiaries will be subject to a section 382 limitation.
In addition, Marvel may also undergo an ownership change within the meaning of
section 382 of the Code. Thus, to the extent that Marvel is a loss corporation,
such losses will be limited. No assurance can be provided that the Marvel
Entertainment NOL carryovers and built-in losses (if any) will be available to
offset income.
Preferred Stock Dividends
Because Marvel is required to redeem the preferred stock on October
1, 2011 for an amount equal to its liquidation preference plus all accrued and
unpaid dividends, whether or not declared, to the redemption date, for Federal
income tax purposes, holders of the preferred stock will be deemed to have
received, each year, an amount equal to the dividends accruing on the preferred
stock, regardless of whether they receive cash distributions. If and to the
extent Marvel has current or accumulated earnings and profits, this deemed
distribution will be treated as ordinary dividend income. If the deemed
distribution exceeds the current or accumulated earnings and profits of Marvel,
the excess will be a return of capital (requiring the holders of the preferred
stock to reduce their tax basis in the preferred stock and then recognize gain).
In addition, if at any time Marvel makes a distribution to its stockholders and,
pursuant to the antidilution provisions of the preferred stock, the conversion
rate of the preferred stock is increased, such increase may be deemed to be the
payment of a taxable dividend to the holders of the preferred stock.
Because the preferred stock is subject to mandatory redemption and,
subject to certain limitations, is exchangeable for 8% Convertible Subordinated
Debentures at Marvel's option, there is a risk that the preferred stock could be
treated as indebtedness for Federal income tax purposes. Marvel intends to take
the position (which counsel believes is reasonable) that the preferred stock
constitutes stock for Federal income tax purposes and, therefore, the material
tax consequences to holders of preferred stock should be as described herein.
If, however, it is determined that the preferred stock is debt, corporate
holders would not be entitled to the benefit of the dividends received deduction
discussed below and the yield to the holders of the preferred stock would be
taxable as original issue discount (i.e., interest income), whether or not
actual cash payments are received and whether or not Marvel has current or
accumulated earnings and profits. The remainder of the discussion assumes that
the preferred stock will be classified as stock for Federal income tax purposes.
Taxable dividends on the preferred stock should qualify for the
dividends received deduction in the hands of qualifying corporate holders,
subject to the minimum holding period requirements and other applicable
requirements (including the disallowance of the dividends received deduction to
the extent a corporate stockholder incurs interest expense on debt directly
attributable to the preferred stock). A corporate stockholder's liability for
alternative minimum tax may be affected by the portion of the dividends received
that are deducted in computing taxable income.
Section 1059 of the Code reduces the benefit of the dividends
received deduction with respect to "extraordinary dividends" by requiring a
corporate stockholder to reduce its basis in the preferred stock (but not below
zero) by the nontaxed portion (as a result of the dividends received deduction)
of any "extraordinary
782128.4
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<PAGE>
dividend" if the holder has not held the preferred stock for more than two years
before the earliest of the dates on which the corporation declares, announces,
or agrees to, the amount or payment of such dividend. In addition, an amount
treated as a dividend in the case of a redemption that is either non-pro rata as
to all stockholders, in partial liquidation, or which would not have been
treated as a dividend if any options had not been taken into account under
Section 318(a)(4) of the Code or if Section 304(a) of the Code had not applied,
would also constitute an extraordinary dividend even if the preferred stock were
held for more than two years before the date of announcement or agreement with
respect to the redemption. If the nontaxed portion of all extraordinary
dividends exceeds the corporate holder's basis, the excess is treated as taxable
gain. The dividends on the preferred stock may constitute extraordinary
dividends for this purpose. An "extraordinary dividend" on the preferred stock
would generally be a dividend (including a deemed dividend) that either equals
or exceeds 5% of the holder's basis in such stock, treating all dividends having
ex-dividend dates within an 85-day period as one dividend, or exceeds 20% of the
holder's basis in such stock, treating all dividends having ex-dividend dates
within a 365-day period as one dividend. However, if the market value can be
established by the holder to the satisfaction of the Secretary of the Treasury,
it may be substituted for stock basis.
If stock pays fixed dividends at least annually, has no dividends in
arrears at the time it is acquired by a corporate holder, and does not have an
actual rate of return exceeding 15%, then a fixed dividend paid with respect to
such stock will be a "qualified preferred dividend" that may qualify for special
relief under Section 1059 of the Code. Under this relief provision, (a) a
qualified preferred dividend is not treated as "extraordinary" if the taxpayer
holds such stock for more than five years or (b) if the taxpayer disposes of
such stock before it has been held for more than five years, then the amount of
the basis reduction under Section 1059 of the Code with respect to such
dividends will not be greater than the excess (if any) of (i) the qualified
preferred dividends paid with respect to such stock during the period the
taxpayer held the stock over (ii) the qualified preferred dividends that would
have been paid during such period on the basis of the stated rate of return. For
purposes of determining the actual rate of return or the stated rate of return,
the average amount of actual dividends received (or deemed received under
Section 305 of the Code), or the stated dividends, as the case may be, are
compared with the lesser of the holder's adjusted tax basis in the stock or the
liquidation preference (excluding dividend arrearages) of the stock.
Conversion of Preferred Stock to Common Stock
If the preferred stock is converted to common stock, neither the
holder of the preferred stock nor Marvel should recognize gain or loss for
Federal income tax purposes. Income will generally be recognized, however, to
the extent common stock is received in payment of dividends in arrears. The tax
basis for the preferred stock will be transferred to the common stock in the
hands of a converting stockholder.
Redemption of Preferred Stock for Cash
A redemption of the preferred stock will be a taxable event that will
be treated as a sale or exchange (on which capital gain or loss may be realized)
if the redemption (a) results in a "complete termination" of the stockholder's
stock interest in Marvel under Section 302(b)(3) of the Code, (b) is
"substantially disproportionate" with respect to the stockholder under Section
302(b)(2) of the Code, or (c) is "not essentially equivalent to a dividend" with
respect to the stockholder under Section 302(b)(1) of the Code. The gain or loss
recognized will be an amount equal to the difference between the stockholder's
adjusted tax basis in the preferred stock and the amount of cash received (less
any cash received in payment of accumulated and declared but unpaid dividends,
which will be taxable as ordinary income if not previously included in a
holder's income). In determining whether any of these tests has been met, shares
considered to be owned by the stockholder by reason of certain constructive
ownership rules set forth in Section 318 of the Code, as well as shares actually
owned, must be taken into account. A holder's gain, if any, will generally be
considered a capital gain and will be long-term if the holder has held the
preferred stock for more than one year. Capital gains realized by corporations
are generally taxed at the same rates applicable to ordinary income, although
non-corporate taxpayers who realize
782128.4
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<PAGE>
long-term capital gains may be subject to a reduced tax rate of 20% on such
gains, rather than the "regular" maximum tax rate of 39.6%. Tax rates may
increase prior to the time when holders may realize gains.
Because satisfaction of either of these tests will depend on the
particular facts and circumstances of each holder of preferred stock as they
exist at the time of the redemption, each holder is urged to consult its own tax
adviser as to whether it would be entitled to sale or exchange treatment in
connection with such a redemption.
If a redemption of the preferred stock does not meet any of the tests
under Section 302 of the Code, it will be treated as a distribution that is
taxable as a dividend under Section 301 of the Code to the extent of Marvel's
current or accumulated earnings and profits. The dividend amount should be the
amount of cash received by the stockholder. If a corporate stockholder has
dividend treatment on a redemption of the preferred stock, the dividend will be
an extraordinary dividend under Section 1059 of the Code irrespective of such
holder's holding period.
Exchange of Preferred Stock for 8% Convertible Subordinated Debentures
Marvel may, under certain circumstances, exchange all of the
preferred stock for 8% Convertible Subordinated Debentures of Marvel. If this
occurs, the treatment to the holders of the preferred stock will generally be as
described under the caption "Redemption of Preferred Stock for Cash" above. If
gain or loss is recognized for Federal income tax purposes, an amount equal to
the difference between the issue price of the 8% Convertible Subordinated
Debentures (less any amount attributable to accumulated and declared but unpaid
dividends, which will be taxable as ordinary income if not previously included
in a holder's income) and the holders' adjusted tax basis in the preferred stock
will be taken into account. If issuance of the 8% Convertible Subordinated
Debentures is treated as a dividend, the amount of the distribution should be
the issue price of the 8% Convertible Subordinated Debentures. If the 8%
Convertible Subordinated Debentures have original issue discount upon their
issuance, a holder will be required to include in income an amount equal to the
sum of the "daily portions" of such original issue discount, even if the holder
does not receive cash payments of interest.
Backup Withholding
Under Section 3406 of the Code and under applicable Treasury
regulations, a noncorporate holder of preferred stock, 8% Convertible
Subordinated Debentures, or common stock may be subject to backup withholding at
the rate of 31% with respect to dividends or interest paid on, original issue
discount accrued with respect to, or the proceeds of a sale, exchange, or
redemption of, preferred stock, 8% Convertible Subordinated Debentures, or
common stock, as the case may be. The payor will be required to deduct and
withhold the prescribed amounts if (i) the payee fails to furnish a taxpayer
identification number (TIN) to the payor, (ii) the IRS notifies the payor that
the TIN furnished by the payee is incorrect, (iii) there has been a "notified
payee under-reporting" described in Section 3406(c) of the Code, or (iv) there
has been a failure of the payee to certify under penalty of perjury that the
payee is not subject to withholding under Section 3406(a)(1)(C) of the Code. If
any one of the events listed above occurs, Marvel will be required to withhold
an amount equal to 31% from any dividend payment made with respect to preferred
stock or common stock, any payment of interest or principal pursuant to the
terms of the 8% Convertible Subordinated Debentures, or any payment of proceeds
of a redemption of such instruments, to a noncorporate holder. Amounts paid as
backup withholding do not constitute an additional tax and will be credited
against the holder's Federal income tax liabilities.
782128.4
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<PAGE>
USE OF PROCEEDS
Any shares of stock offered under this prospectus will be offered by
the selling stockholders. See "Plan of Distribution." We will not receive any
proceeds from the sale of shares of stock offered under this prospectus.
SELLING STOCKHOLDERS
The following table sets forth certain information with respect to
the amount of common stock and preferred stock held by each selling stockholder
as of the date of this prospectus. The table indicates the nature of any
position, office, or other material relationship which the selling stockholder
has had within the past three years with Marvel or any of its predecessors or
affiliates. Certain of the selling stockholders are parties to a stockholders'
agreement with Marvel dated as of October 1, 1998 (the "Stockholders'
Agreement"), which is described in "Risk Factors--The outcome of stockholder
votes is controlled by a small number of stockholders." Those parties are
identified by a double asterisk in the table. For the total number of shares
covered by this prospectus, see Notes 1 and 3 to the table. The selling
stockholders may offer all or part of the common stock or preferred stock
covered by this prospectus. No estimate, therefore, can be given as to the
amount of common stock or preferred stock that will be held by the selling
stockholders upon completion of the offering under this prospectus. The common
stock and preferred stock offered by this prospectus may be offered from time to
time by the selling stockholders named below.
<TABLE>
<CAPTION>
A B C D E F
Number of
Shares of Number of
Common Existing Percentage
Number of Stock Shares of Represented
Shares of Underlying the Common Sum of by Column E
Name, Address, and Preferred Stock Shares Listed Stock Columns of Shares
Relationship to Marvel Owned(1) in Column B Owned(2) C and D(3) Outstanding(4)
---------------------- -------- ----------- -------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Dickstein & Co., L.P.(5)** 2,468,002 2,564,254 1,458,029 4,022,283 7.8%
c/o Dickstein Partners Inc.
660 Madison Avenue
16th Floor
New York, NY 10021
Dickstein Focus Fund L.P.(5)** 237,229 246,480 170,620 417,100 0.8%
c/o Dickstein Partners Inc.
660 Madison Avenue
16th Floor
New York, NY 10021
Dickstein International 821,994 854,051 138,967 993,018 1.9%
Limited(5)**
c/o Dickstein Partners Inc.
660 Madison Avenue
16th Floor
New York, NY 10021
</TABLE>
782128.4
16
<PAGE>
<TABLE>
<CAPTION>
A B C D E F
Number of
Shares of Number of
Common Existing Percentage
Number of Stock Shares of Represented
Shares of Underlying the Common Sum of by Column E
Name, Address, and Preferred Stock Shares Listed Stock Columns of Shares
Relationship to Marvel Owned(1) in Column B Owned(2) C and D(3) Outstanding(4)
---------------------- -------- ----------- -------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Elyssa Dickstein, Jeffrey 51,000 52,989 0 52,989 0.1%
Schwarz and Alan Cooper as
Trustees U/T/A/D 12/27/88,
Mark Dickstein, Grantor(5)**
c/o Dickstein Partners Inc.
660 Madison Avenue
16th Floor
New York, NY 10021
Mark Dickstein and Elyssa 10,200 10,597 0 10,597 *
Dickstein, as Trustees of the
Mark and Elyssa Dickstein
Foundation(5)**
c/o Dickstein Partners Inc.
660 Madison Avenue
16th Floor
New York, NY 10021
Elyssa Dickstein(5)** 142,800 148,369 0 148,369 0.3%
c/o Dickstein Partners Inc.
660 Madison Avenue
16th Floor
New York, NY 10021
Mark Dickstein(5)** 0 0 57,500 57,500 0.1%
c/o Dickstein Partners Inc.
660 Madison Avenue
16th Floor
New York, NY 10021
Object Trading Corp.(6)** 3,562,710 3,701,655 33,500 3,735,155 7.3%
685 Third Avenue
New York, NY 10017
Zib Inc.(6)** 0 0 9,256,000 9,256,000 18.0%
1105 North Market Street
Room 1300
Wilmington, DE 19801
The Laura & Isaac Perlmutter 0 0 250,000 250,000 0.5%
Foundation Inc.(6)**
P.O. Box 1028
Lake Worth, FL 33460
Avi Arad(7)** 0 0 4,150,000 4,150,000 8.1%
1698 Post Road East
Westport, CT 06880
</TABLE>
782128.4
17
<PAGE>
<TABLE>
<CAPTION>
A B C D E F
Number of
Shares of Number of
Common Existing Percentage
Number of Stock Shares of Represented
Shares of Underlying the Common Sum of by Column E
Name, Address, and Preferred Stock Shares Listed Stock Columns of Shares
Relationship to Marvel Owned(1) in Column B Owned(2) C and D(3) Outstanding(4)
---------------------- -------- ----------- -------- ---------- --------------
<S> <C> <C> <C> <C> <C>
The President and Fellows of 562,327 584,257 484,997 1,069,254 2.1%
Harvard College(8)
c/o Whippoorwill Associates,
Incorporated
11 Martine Avenue
White Plains, NY 10606
Attn: Shelley F. Greenhaus
The Rockefeller Foundation(8) 212,658 220,951 121,539 342,490 0.7%
c/o Whippoorwill Associates,
Incorporated
11 Martine Avenue
White Plains, NY 10606
Attn: Shelley F. Greenhaus
Vega Partners II, L.P.(8) 239,284 248,616 137,458 386,074 0.8%
c/o Whippoorwill Associates,
Incorporated
11 Martine Avenue
White Plains, NY 10606
Attn: Shelley F. Greenhaus
Vega Partners III, L.P.(8) 554,139 575,750 317,594 893,344 1.7%
c/o Whippoorwill Associates,
Incorporated
11 Martine Avenue
White Plains, NY 10606
Attn: Shelley F. Greenhaus
Vega Partners IV, L.P.(8) 349,511 363,141 200,814 563,955 1.1%
c/o Whippoorwill Associates,
Incorporated
11 Martine Avenue
White Plains, NY 10606
Attn: Shelley F. Greenhaus
Vega Offshore Fund Trust(8) 141,324 146,835 86,109 232,944 0.5%
c/o Whippoorwill Associates,
Incorporated
11 Martine Avenue
White Plains, NY 10606
Attn: Shelley F. Greenhaus
</TABLE>
782128.4
18
<PAGE>
<TABLE>
<CAPTION>
A B C D E F
Number of
Shares of Number of
Common Existing Percentage
Number of Stock Shares of Represented
Shares of Underlying the Common Sum of by Column E
Name, Address, and Preferred Stock Shares Listed Stock Columns of Shares
Relationship to Marvel Owned(1) in Column B Owned(2) C and D(3) Outstanding(4)
---------------------- -------- ----------- -------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Whippoorwill Associates, Inc. 2,758 2,865 1,896 4,761 *
Profit Sharing Plan(8)
c/o Whippoorwill Associates,
Incorporated
11 Martine Avenue
White Plains, NY 10606
Attn: Shelley F. Greenhaus
Foothill Capital Corporation 1,644 1,708 0 1,708 *
11111 Santa Monica Blvd., Suite
1500
Los Angeles, CA 90025
Attn: Karen Sandler
Foothill Partners II, L.P. 16,612 17,259 0 17,259 *
11111 Santa Monica Blvd., Suite
1500
Los Angeles, CA 90025
Attn: Karen Sandler
Foothill Partners III, L.P. 40,632 42,216 0 42,216 *
11111 Santa Monica Blvd., Suite
1500
Los Angeles, CA 90025
Attn: Karen Sandler
Elliott Associates, L.P. 145,044 150,700 0 150,700 0.3%
712 Fifth Avenue, 35th Floor
New York, NY 10019
Attn: Michael Stephan
Morgan Stanley & Co. 2,210,247 2,296,446 2,269,375 4,565,821 8.9%
Incorporated**
c/o Morgan Stanley
1585 Broadway
New York, NY 10036
Attn: Edgar Sabounghi
The Chase Manhattan Bank ** 792,746 823,663 1,288,777 2,112,440 4.1%
380 Madison Avenue, 9th Floor
New York, NY 10071
Attn: Susan Atkins
- - ------------------------------------------------------------------------------------------------------------------------------
TOTAL 12,562,861 13,052,802 20,413,175(9) 33,465,977(9) 65.1%
* = Less than 0.1%
** = Signatory of Stockholders' Agreement. See also Note 8.
</TABLE>
782128.4
19
<PAGE>
(1) In the case of each selling stockholder, all the shares of preferred
stock listed in Column B may be offered pursuant to this prospectus.
In addition, shares of preferred stock paid as dividends in kind on
the shares of preferred stock listed in Column B may be offered
pursuant to this prospectus. The total number of shares of preferred
stock covered by this prospectus is 15,620,234, which is equal to
12,562,861 (the total of the numbers in Column B) plus 3,057,373 (the
approximate number of shares of preferred stock that would be
necessary to pay dividends in kind on 12,562,861 shares of preferred
stock through 2001). See Note 3 for the total number of shares of
common stock offered pursuant to this prospectus.
(2) Does not include shares of common stock listed in Column C.
(3) The total number of shares of common stock offered pursuant to this
prospectus is 36,642,683, which is equal to 33,465,977 (the total of
the numbers in Column E; but see Note 9) plus 3,176,706 (the
approximate number of shares of common stock that underlie the shares
of preferred stock that would be necessary to pay dividends in kind
on 12,562,861 shares of preferred stock through 2001; see Note 1).
See Note 1 for the total number of shares of preferred stock offered
pursuant to this prospectus.
(4) "Shares Outstanding" refers to the 51,442,450 shares of common stock
that would be outstanding if all outstanding shares of preferred
stock were converted into shares of common stock. "Shares
Outstanding" does not include shares that would be outstanding if
warrants or rights were exercised.
(5) (a) Dickstein & Co., L.P. is a Delaware limited partnership.
(b) Dickstein Focus Fund L.P. is a Delaware limited partnership.
(c) Dickstein International Limited is a limited-liability, open-end
investment fund incorporated as an international business
company in the Territory of the British Virgin Islands.
(d) Elyssa Dickstein, Jeffrey Schwarz and Alan Cooper as Trustees
U/T/A/D 12/27/88, Mark Dickstein, Grantor is a New York trust
established by Mark Dickstein, as Grantor, for the benefit of
his children. Elyssa Dickstein, Jeffrey Schwarz and Alan Cooper
are the trustees of the trust. Mark Dickstein has no beneficial
interest in the trust.
(e) The Mark and Elyssa Dickstein Foundation is a New York trust
organized to be exempt from Federal income taxes under Section
501(c)(3) of the Internal Revenue Code.
(f) Mark Dickstein, a director and principal stockholder of Marvel,
is the president, sole stockholder and sole director of
Dickstein Partners Inc., a Delaware corporation that is the
advisor to Dickstein International Limited and is the general
partner of Dickstein Partners, L.P., a Delaware limited
partnership which in turn is the general partner of both
Dickstein & Co., L.P. and Dickstein Focus Fund L.P. Mr.
Dickstein is a trustee and the grantor of the Mark and Elyssa
Dickstein Foundation and has the sole and exclusive authority to
invest the principal of that foundation.
(g) Elyssa Dickstein is the wife of Mark Dickstein and is a trustee
of the Mark and Elyssa Dickstein Foundation and the trust
described in (d), above.
(6) (a) Object Trading Corp., a Delaware corporation, is wholly
owned by Isaac Perlmutter, a director and principal stockholder
of Marvel.
(b) Zib Inc., a Delaware corporation, is wholly owned by the Isaac
Perlmutter T.A., a Florida trust established by Mr. Perlmutter
(the "Trust"). Mr. Perlmutter is a trustee and the sole
beneficiary of the Trust, and may revoke the Trust at any time.
(c) Mr. Perlmutter is a director and the president of The Laura &
Isaac Perlmutter Foundation Inc., a Florida not-for-profit
corporation.
(7) Mr. Arad, a director and principal stockholder of Marvel, is the
Chief Creative Officer of Marvel and the President and Chief
Executive Officer of Marvel's Marvel Studios division.
(8) Whippoorwill Associates, Incorporated, a Delaware corporation, as
agent of and/or general partner for these accounts, is a signatory of
the Stockholders' Agreement.
(9) Total figures do not include 10,000 of the shares of common stock
owned by Mark Dickstein. Those 10,000 shares are not covered by this
prospectus.
782128.4
20
<PAGE>
PLAN OF DISTRIBUTION
The shares of common stock and preferred stock covered by this
prospectus are now owned by the selling stockholders. As used in the rest of
this section of the prospectus, the term "Selling Stockholders" includes the
named selling stockholders and any of their pledgees, donees, transferees or
other successors in interest selling shares received from a named selling
stockholder after the date of this prospectus. The shares of common stock and
preferred stock covered by this prospectus are referred to in this section as
the "Shares." The selling stockholders may offer and sell, from time to time,
some or all of the Shares. We have registered the Shares for sale by the selling
stockholders so that the Shares will be freely tradeable by them. Registration
of the Shares does not mean, however, that the Shares will necessarily be
offered or sold. We will not receive any proceeds from any offering or sale by
the selling stockholders of the Shares. We will pay all costs, expenses and fees
in connection with the registration of the Shares. The selling stockholders will
pay all brokerage commissions and similar selling expenses, if any, attributable
to the sale of the Shares.
The selling stockholders may sell the Shares from time to time, at
market prices prevailing at the time of sale or at negotiated prices, by methods
such as the following: (a) on markets where our common stock or preferred stock
is traded or in an exchange distribution in accordance with the rules of the
exchange; (b) in privately negotiated transactions; (c) through broker-dealers,
which may act as agents or principals; (d) in a block trade in which a
broker-dealer will attempt to sell a block of Shares as agent but may position
and resell a portion of the block as principal to facilitate the transaction;
(e) through one or more underwriters on a firm commitment or best-efforts basis;
(f) directly to one or more purchasers; (g) through agents; (h) through put or
call option transactions, forward contracts or equity swaps relating to the
Shares; (i) through short sales of the Shares by the selling stockholders or
counterparties to those transactions; or (j) in any combination of the above.
In effecting sales, brokers or dealers engaged by the selling
stockholders may arrange for other brokers or dealers to participate. The
broker-dealer transactions may include (a) purchases of the Shares by a
broker-dealer as principal and resales of the Shares by the broker-dealer for
its account pursuant to this prospectus; (b) ordinary brokerage transactions; or
(c) transactions in which the broker-dealer solicits purchasers.
If a material arrangement with any underwriter, broker, dealer or
other agent is entered into for the sale of any Shares through a secondary
distribution, or a purchase by a broker or dealer, a prospectus supplement will
be filed, if necessary, pursuant to Rule 424(b) under the Securities Act
disclosing the material terms and conditions of such arrangement. If an
underwriter or underwriters are used in the sale of Shares, Marvel and the
selling stockholders will execute an underwriting agreement with such
underwriter or underwriters at the time an agreement for such sale is reached.
The underwriter or underwriters with respect to an underwritten offering of
Shares and the other material terms and conditions of the underwriting will be
set forth in a prospectus supplement relating to such offering and, if an
underwriting syndicate is used, the managing underwriter or underwriters will be
set forth on the cover of such prospectus supplement. In connection with the
sale of Shares, underwriters will receive compensation in the form of
underwriting discounts or commissions and may also receive commissions from
purchasers of Shares for whom they may act as agent. Underwriters may sell to or
through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters and/or commissions
from the purchasers for whom they may act as agent.
The Shares may be sold either at a fixed price or prices that may be
changed, at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices.
The selling stockholders and any underwriters, broker-dealers or
agents participating in the distribution of the Shares may be deemed to be
"underwriters" within the meaning of the Securities Act, and any profit on the
sale of the Shares by the selling stockholders and any commissions received by
any such broker-dealers or agents may be deemed to be underwriting commissions
under the Securities Act. We have agreed to indemnify some of the selling
stockholders -- those who signed Registration Rights Agreements with us, dated
as of October 1, 1998 and December 8, 1998 --, and each person or entity which
participates as or may be deemed to
782128.4
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<PAGE>
be an underwriter in the offering or sale of those selling stockholders' shares,
against certain liabilities (and to contribute to payments in respect thereof),
including liabilities arising under the Securities Act. The selling stockholders
may agree to indemnify any agent or broker-dealer that participates in
transactions involving sales of the Shares against certain liabilities,
including liabilities arising under the Securities Act.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any document we file at the Securities and Exchange Commission's public
reference rooms at 450 Fifth Street, N.W., Washington, D.C. 20549, 7 World Trade
Center, 13th Floor, New York, New York 10048, and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Please call the
Securities and Exchange Commission at 1-800-SEC-0330 for further information on
the public reference rooms. Our Securities and Exchange Commission filings are
also available to the public from the Securities and Exchange Commission's
Website at "http://www.sec.gov."
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with them, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus, and information that we file later with the Securities and Exchange
Commission will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
will make with the Securities and Exchange Commission under Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934:
1. Our Annual Report on Form 10-K for the year ended December
31, 1997;
2. Our Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1998, June 30, 1998 and September 30, 1998;
3. Our Current Reports on Form 8-K filed with the Securities
and Exchange Commission on August 3, 1998, October 2, 1998,
and October 14, 1998, our Current Report on Form 8-K/A
filed on October 16, 1998, our Current Report on Form
8-K/A-2 filed on November 25, 1998 (which incorporates by
reference the consolidated financial statements included in
Marvel Entertainment Group, Inc.'s Annual Report on Form
10-K/A for the year ended December 31, 1997 and its
Quarterly Reports on Form 10-Q for the quarters ended March
31, 1998 and June 30, 1998), and our Current Reports on
Form 8-K filed on February 4, 1999, February 24, 1999,
February 25, 1999, and March 10, 1999;
4. Our descriptions of our common stock and preferred stock
contained in our Registration Statements on Form 8-A filed
on October 2, 1998 (SEC File Nos. 001-13638 and 000-24937);
5. The section entitled "THE MARVEL PROPOSALS -- Securities to
be Issued and Transferred under the Plan" on pages 82-87 of
our Proxy Statement on Schedule 14A (SEC File No.
001-13638), as filed with the Securities and Exchange
Commission on August 13, 1998, which includes descriptions
of our common stock and preferred stock;
6. The section entitled "INFORMATION CONCERNING MARVEL" on
pages 29-37 of the Proxy Statement described in the
preceding paragraph, which includes information concerning
Marvel Entertainment Group, Inc.; and
782128.4
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<PAGE>
7. The consolidated financial statements and schedule
contained in the Annual Report of Marvel Entertainment
Group, Inc. on Form 10-K/A for the year ended December 31,
1997.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address: Marvel Enterprises, Inc., 387 Park
Avenue South, New York, New York 10016, Attention: William H. Hardie, III,
Corporate Secretary. Telephone requests may be directed to (212) 696-0808.
This prospectus is part of a registration statement we filed with the
Securities and Exchange Commission. You should rely only on the information
contained in this prospectus. We have authorized no one to provide you with
different information. We are not making an offer of these securities in any
state where the offer is not permitted. You should not assume that the
information in this prospectus is accurate as of any date other than the date on
the front of the document.
EXPERTS
The consolidated financial statements of Marvel Enterprises, Inc.
(formerly Toy Biz, Inc.) and its subsidiaries as of December 31, 1997 and 1998
and for each of the three years in the period ended December 31, 1998
incorporated herein by reference to Marvel Enterprises, Inc.'s Current Report on
Form 8-K filed on March 10, 1999 have been audited by Ernst & Young LLP,
independent auditors, as stated in their report included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Marvel Entertainment Group,
Inc. and its subsidiaries as of December 31, 1996 and 1997 and for each of the
three years in the period ended December 31, 1997 incorporated herein by
reference to Marvel Entertainment Group, Inc.'s Annual Report on Form 10-K/A for
the year ended December 31, 1997 have been audited by Ernst & Young LLP,
independent auditors, as stated in their report included therein (which contains
an explanatory paragraph describing conditions that raise substantial doubt
about Marvel Entertainment Group, Inc.'s ability to continue as a going concern,
as described in Note 1 to the consolidated financial statements) and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the shares of common stock and preferred stock
offered hereby has been passed upon for us by Battle Fowler LLP, New York, New
York. Lawrence Mittman, a director of Marvel, is a partner of Battle Fowler LLP.
782128.4
23
<PAGE>
- - --------------------------------------------------------------------------------
No dealer, salesperson or other 36,642,683 Shares of Common Stock
individual has been authorized to give or make any representations
any information not contained in this
prospectus in connection with the 15,620,234 Shares of 8% Cumulative
offering covered by this prospectus. If Convertible Exchangeable
given or made, such information or Preferred Stock
representation must not be relied upon
as having been authorized by us or the
selling stockholders. This prospectus
does not constitute an offer to sell, or
a solicitation of an offer to buy,
common stock and/or preferred stock in MARVEL ENTERPRISES, INC.
any jurisdiction where, or to any person
to whom, it is unlawful to make such
offer or solicitation. Neither the
delivery of this prospectus nor any sale
made hereunder shall, under any
circumstances, create an implication
that there has not been any change in
the facts set forth in this prospectus
or in our affairs since the date hereof.
TABLE OF CONTENTS Prospectus
Page
Prospectus Summary.....................3
Risk Factors...........................5
Ratio of Combined Fixed Charges and
Preference Dividends to Earnings...11
Forward-Looking Statements............11
Federal Income Tax Considerations.....12 March 11, 1999
Use of Proceeds.......................16
Selling Stockholders..................16
Plan of Distribution..................21
Where You Can Find More Information...22
Experts...............................23
Legal Matters.........................23
- - -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
Set forth below is an estimate of the approximate amount of the fees
and expenses (other than underwriting discounts and commissions) incurred in
connection with the issuance and distribution of the shares of common stock and
preferred stock to be registered under this Registration Statement. The selling
stockholders will bear no portion of the fees and expenses estimated below.
Those fees and expenses will be borne entirely by Marvel.
Securities and Exchange Commission, registration fee.............$ 87,272
Federal taxes..............................................................0
State taxes and fees.......................................................0
Transfer agent's fees......................................................0
Engineering fees...........................................................0
Printing and engraving costs..........................................25,000
Mailing expenses.......................................................1,000
Accounting fees and expenses..........................................35,000
Legal fees and expenses..............................................100,000
Miscellaneous expenses............................................. 20,000
-------
Total..............................................$ 268,272
===========
Item 15. Indemnification of Directors and Officers
In accordance with Section 102(b)(7) of the Delaware General
Corporation Law, Article X of our Certificate of Incorporation eliminates, with
certain exceptions, our directors' personal liability to Marvel or its
stockholders for monetary damages for breach of fiduciary duty as a director.
Article 6 of our By-Laws provides, to the extent permitted by the
Delaware General Corporation Law, for our indemnification of present or former
directors, officers or incorporators of Marvel against various costs they may
incur in connection with certain lawsuits and similar proceedings in which they
become involved by reason of their relationship to Marvel. Only those who have
acted in good faith are entitled to our indemnification. In certain cases, our
indemnification payments may be made, conditionally, before the lawsuit or
similar proceeding is complete.
Item 16. Exhibits
2.1 -- Fourth Amended Plan of Reorganization filed with the United
States District Court for the District of Delaware on July 31,
1998 by certain creditors of Marvel Entertainment Group, Inc.
and the Registrant, with attached exhibits (incorporated by
reference to Exhibit 2.1 to the Registrant's Current Report on
Form 8-K, dated as of October 13, 1998, and filed on October 14,
1998).
4.1 -- The Registrant's Restated Certificate of Incorporation
(incorporated by reference to Exhibit 4.1 to the Registrant's
Current Report on Form 8-K, dated as of October 13, 1998, and
filed on October 14, 1998).
782128.4
II-1
<PAGE>
5.1 -- Opinion of Battle Fowler LLP.*
12.1 -- Statements re: Computation of Ratios.
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Ernst & Young LLP.
24.1 -- Power of Attorney.*
____________________
* Previously filed.
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range may
be reflected in the form of a prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered which remain unsold
at the termination of the offering.
The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered
782128.4
II-2
<PAGE>
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referred to in Item 15 of
this Registration Statement, or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer, or controlling person of the Registrant in the successful defense of
any action, suit, or proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act, and will be governed by the final adjudication of such
issue.
782128.4
II-3
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of New York, New York, on the 11th day of March, 1999.
MARVEL ENTERPRISES, INC.
a Delaware corporation (Registrant)
By: /s/WILLIAM H. HARDIE, III
-----------------------------------------
William H. Hardie, III
Executive Vice President, Business Affairs
and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
* Chairman of the Board and Director March 11, 1999
- - ---------------------
Morton E. Handel
* President and Chief Executive Officer March 11, 1999
- - --------------------- (principal executive officer)
Eric Ellenbogen
/s/ROBERT S. HULL Senior Vice President and March 11, 1999
- - --------------------- Chief Financial Officer (principal
Robert S. Hull financial and accounting officer)
* Chief Creative Officer and Director March 11, 1999
- - ---------------------
Avi Arad
* Director March 11, 1999
- - ---------------------
Mark Dickstein
* Director March 11, 1999
- - ---------------------
Eric Ellenbogen
</TABLE>
782128.4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
* Director March 11, 1999
- - ---------------------
Shelley F. Greenhaus
* Director March 11, 1999
- - ---------------------
James F. Halpin
* Director March 11, 1999
- - ---------------------
Michael M. Lynton
* Director March 11, 1999
- - ---------------------
Lawrence Mittman
* Director March 11, 1999
- - ---------------------
Isaac Perlmutter
* Director March 11, 1999
- - ---------------------
Rod Perth
* Director March 11, 1999
- - ---------------------
Michael J. Petrick
*By: /s/ WILLIAM H. HARDIE, III March 11, 1999
- - ----------------------------------------
William H. Hardie, III
Attorney-in-fact
</TABLE>
Exhibit 12.1
Statement re: Computation of Ratios
MARVEL ENTERPRISES, INC.
RATIO OF COMBINED FIXED CHARGES AND PREFERENCE DIVIDENDS TO EARNINGS
1993 - 1998
(in thousands)
<TABLE>
<CAPTION>
Pro Forma
1993 1994 1995 1996 1997 1998 1998
---- ---- ---- ---- ---- ---- ----
Fixed Charges and Preference
Dividends:
<S> <C> <C> <C> <C> <C> <C> <C>
Interest on Rent Expense 74 135 174 263 407 353 1,391
Interest Expense - Gross 1,231 1,862 498 123 821 9,543 40,543
Preferred Stock Dividends -- -- 42 105 71 3,380 13,520
--------------------------------------------------------------------------------------------
Total Fixed Charges and Preference
Dividends 1,305 1,997 714 491 1,299 13,276 55,454
============================================================================================
Earnings:
Pretax Income 4,017 30,275 47,574 27,811 (49,650) (28,224) (76,600)
Fixed Charges and Preference
Dividends 1,305 1,997 714 491 1,299 13,276 55,454
--------------------------------------------------------------------------------------------
Total Earnings 5,322 32,272 48,288 28,302 (48,351) (14,948) (21,146)
============================================================================================
Ratio of Combined Fixed Charges
and Preference Dividends to
Earnings 4.08 16.16 67.63 57.64 -- -- --
============================================================================================
</TABLE>
For the purposes of the ratio of combined fixed charges and preference dividends
to earnings, earnings were calculated by adding pretax income, interest expense
and the portion of rents representative of an interest factor. Combined fixed
charges consist of interest expense and the portion of rents representative of
an interest factor. For the periods in which earnings were insufficient to cover
combined fixed charges and preference dividends, the dollar amount of coverage
deficiency was $49.7 million, $31.6 million and $90.1 million for the twelve
months ended December 31, 1997 and 1998 and the pro-forma twelve months ended
December 31, 1998, respectively.
781024.3
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Post-effective Amendment No. 1 to the Registration Statement (Form S-3 No.
333-68019) and related Prospectus of Marvel Enterprises, Inc. (formerly Toy Biz,
Inc.) for the registration of 36,642,683 shares of its common stock and
15,620,234 shares of its 8% cumulative convertible exchangeable preferred stock,
and to the incorporation by reference therein of our report dated February 5,
1999 (except for Note 3, as to which the date is February 11, 1999 and Notes 1
and 5, as to which the date is February 25, 1999), with respect to the
consolidated financial statements and schedule of Marvel Enterprises, Inc. for
the year ended December 31, 1998, included in its Current Report on Form 8-K
dated February 25, 1999, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
New York, New York
March 10, 1999
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Post-effective Amendment No. 1 to the Registration Statement (Form S-3 No.
333-68019) and related Prospectus of Marvel Enterprises, Inc. (formerly Toy Biz,
Inc.) for the registration of 36,642,683 shares of its common stock and
15,620,234 shares of its 8% cumulative convertible exchangeable preferred stock,
and to the incorporation by reference therein of our report dated April 14,
1998, with respect to the consolidated financial statements and schedule of
Marvel Entertainment Group, Inc. included in its Annual Report (Form 10-K/A) for
the year ended December 31, 1997, filed with the Securities and Exchange
Commission.
/s/ ERNST & YOUNG LLP
New York, New York
March 10, 1999
