Navarre Sells Unit, Board Seeks New CEO
Navarre Corporation is making some bold moves in an effort to boost its top line-replacing its CEO of four years, selling its FUNimation Entertainment unit for $24 million, and shifting its business focus from entertainment media distribution to consumer electronic accessories and software publishing.
J. Reid Porter, the company's chief financial officer and chief operating officer, will serve as interim CEO, replacing Cary Deacon, while the company conducts a national external search for a new CEO.
Porter told Twin Cities Business on Thursday that it was the company's board, not Deacon, that determined it was time for a leadership change. He added that Deacon played an integral role in helping the company get through the recession but Navarre is now focused on growing its top line, which the board says necessitates new leadership.
“The company went into the recession with a lot of debt, and we did a good job performing through the downturn,” Porter said. “Now is the time for revenue growth, and the board felt new leadership was in order for that.”
Porter said that the company has not yet determined the precise job specifications for the CEO position, but the board seeks someone who is focused on revenue growth and has the ability to bring in new product lines. Porter also said that the company will look for someone with experience in providing front-end services to suppliers and who has a background in Web-based marketing services.
The sale of the company's FUNimation Entertainment unit doesn't come as much of a surprise. Navarre, which became debt-free as of March 31, has been seeking a buyer for the unit for nearly a year so that it can focus on the distribution of new product lines and grow its software publishing business.
The company said that shifting its focus from distributing entertainment media has already helped it become debt-free and has improved operating margins.
Going forward, the company aims to grow both organically and through strategic acquisitions, Porter said.
The company is shifting into the distribution of consumer electronic accessories-including routers, adapters, headphones, and iPad and iPhone accessories-because sales of physical forms of digital media-like CDs, DVDs, and video games-are diminishing, according to Porter. Navarre will also provide its customers with front-end marketing services in addition to distribution services.
The company also plans to grow through acquisitions and will use the $24 million from the FUNimation sale to “make smaller acquisitions that [Navarre] can integrate into current infrastructure.” Porter said that the company will not seek to buy any standalone entities that can't be integrated into existing businesses.
The FUNimation Entertainment unit, a distributor of Japanese animation, was purchased in an all-cash transaction by an investment group that includes Gen Fukunaga, FUNimation Entertainment's CEO.
Porter said that approximately 10 buyers showed interest in the unit, but it did not receive an “attractive bid” until now. Navarre will remain FUNimation's exclusive distributor in the United States and will also act as its logistics and fulfillment services provider.
Navarre is among Minnesota's 50-largest public companies based on revenue, which totaled $528.3 million in its fiscal year that ended in March 2010. Financial figures for the company's fiscal year that ended last month are not yet available.