An investor group led by TCG is making a $263 million investment in Funko, a pop culture lifestyle brand. The consortium is acquiring ACON Investments’ 80 percent stake in Funko at $21 per share. Other investors participating in the transaction include eBay, ex-Disney CEO/Chairman Robert A. Iger and Rich Paul, head of sports at United Talent Agency. LionTree Advisors is serving as lead financial advisor to TCG on the deal with Stephen Davis also acting as an advisor. And, Goldman Sachs is acting as lead financial advisor to Funko.
LOS ANGELES, May 5, 2022 /PRNewswire/ — The Chernin Group (“TCG”), a multi-stage investment firm known for building and growing emerging consumer businesses in the media, commerce and technology industries, and Funko, Inc. (Nasdaq: FNKO), a leading pop culture lifestyle brand, today announced that a consortium led by TCG will make a $263 million strategic investment in Funko in an all secondary transaction.
TCG and its investor consortium are acquiring from ACON Investments 12,520,559 shares of Funko Class A common stock, or 80% of ACON Investments’ stake in Funko, at $21.00 per share and will own 25% of the Company following completion of the transaction. Additional investors in the consortium include eBay Inc. (Nasdaq: EBAY), Robert A. Iger (Former Disney Chairman and CEO) and Rich Paul (CEO and Founder of Klutch Sports Group and Head of Sports at United Talent Agency). In conjunction with the investment, TCG will designate two directors to the Board including Jesse Jacobs, TCG Co-Founder and Partner. The additional director will be designated at a later date. Mr. Iger and Peter Chernin, TCG Co-Founder and Partner, will provide guidance and strategic insight as advisors to the Funko Board.
As part of this investment, Funko and eBay are entering into a commercial agreement under which eBay will become the preferred secondary marketplace for Funko and the companies will also partner on creating exclusive product releases. Additionally, Mr. Paul will bring his expertise in the sports and music sectors to help advance Funko’s continued product expansion and growth opportunities in sports and music.
“We believe Funko is significantly undervalued in the public markets and at this highly attractive entry price provides a runway of opportunity and growth potential. There are many areas of identifiable growth across content, commerce, marketplaces, consumer products and technology that should drive substantial increases to Funko’s performance,” said Mr. Chernin.
TCG believes the investment will help reinforce Funko’s leadership position in the pop culture collectibles space and advance the Company’s strategic growth initiatives, which include maximizing the core business by (1) expanding its premium intellectual property (IP) and Pop! aesthetic into new content areas, (2) expanding Funko’s pop culture platform through the addition of adjacent physical and digital categories and brands, both organically and through acquisition as appropriate, (3) growing its Direct-to-Consumer (DTC) business and (4) extending its reach into international markets.
“This is a very exciting time to be a part of Funko. We are incredibly appreciative of ACON for their 7 years of collaboration and belief in our company’s long-term potential. This investment from TCG validates Funko as a leading lifestyle brand with a pulse on what’s trending in pop culture,” said Andrew Perlmutter, Funko’s Chief Executive Officer.
“TCG is an ideal partner for Funko based on its expertise, deep understanding of the markets we serve, and track record of working successfully with companies in the pop culture and entertainment space to create value and drive growth. With their support, we are even better positioned to continue developing great products that delight our fans and broadening our base through expanded offerings and new categories.”
“Funko has tremendous brand equity, a deeply engaged consumer base, and an innovative product offering, which makes it a very appealing investment for TCG,” said TCG Co-founder and Partner Jesse Jacobs. “We have demonstrated our ability to drive significant value with our investments in sectors that are core to Funko, including collectibles, content, IP, community and marketplaces, and we see clear opportunities to leverage this expertise at Funko.”
“Funko sits at the intersection of pop culture, passion and collectibles, with one of the most engaged communities of enthusiasts,” said Stefanie Jay, eBay Chief Business and Strategy Officer. “Building on the incredible appetite for Funko products on eBay, we look forward to what our companies can do together. The investment and partnership with Funko will make eBay the preferred resale marketplace for Funko fans around the world and give customers new and exclusive products.”
Funko’s growth and profitability are on a strong trajectory. For fiscal 2021, the Company grew revenue by 58% to over $1 billion and today, reported revenue of $308 million for the first quarter 2022, up 63% year-over-year. In addition, Funko’s adjusted EBITDA increased 87% to $150 million for the full year 2021 and adjusted EBITDA grew 22% for the first quarter 2022.
TCG has successfully partnered with companies, including Exploding Kittens, Crunchyroll and Goldin Auctions, that grow brands with a zealous consumer base and foster authentic relationships with highly engaged audiences. The firm has significant experience investing in adjacent sectors, such as IP, content creation, collectibles, pop culture and fandom, toys and games, media and entertainment, and DTC. As a leader in the pop culture and collectibles space, Funko aligns with TCG’s focus on identifying high-growth sectors and investing in the best category-defining businesses.
Additional details regarding the investment will be included in a Form 8-K to be filed with the SEC.
LionTree Advisors is serving as lead financial advisor to TCG and Stephen Davis is acting as an advisor to TCG. Gibson, Dunn & Crutcher LLP is serving as TCG’s legal counsel. Goldman Sachs & Co. LLC is acting as lead financial advisor to Funko and Latham & Watkins LLP is serving as legal counsel. Winston & Strawn LLP is serving as legal counsel to ACON Investments.