Character Technologies Inc. said in a 13 October announcement that it had filed for Chapter 11 bankruptcy in Delaware and agreed a $20 million stalking-horse transaction with Disney Worldwide Services, Inc. covering a licence to certain intellectual property and company claims.
Key points
- Disney’s proposed licence is non-exclusive and perpetual, and its agreement also provides for transition services.
- The court-supervised process permits higher or better offers for the assets covered by Disney’s bid.
- Character.ai expects to keep operating during the sale process, but says the platform will be wound down if a purchase does not provide for its continuation.
Disney’s $20 million licence bid
Disney agreed before the bankruptcy filing to serve as stalking-horse bidder for a perpetual, non-exclusive licence to certain Character.ai intellectual property and certain company claims, according to Character.ai’s announcement. The agreement calls for Disney to provide $20 million and transition services using former Character.ai employees it has hired.
That licence is the subject of Disney’s bid. Character.ai is conducting a wider process intended to sell all or substantially all of its assets. Disney’s agreement remains subject to higher or better offers under section 363 of the Bankruptcy Code, so the proposed transaction can be displaced in the court-supervised sale.
Character.ai said the transition services would help it operate the platform for a limited period and support the sale process. The services form part of Disney’s proposed consideration alongside the $20 million payment. The former employees who would provide them have already been hired by Disney, according to the company.
The distinction between the proposed licence and the broader sale matters to the transaction’s scope: Disney’s stalking-horse agreement concerns specified intellectual property and claims, while the bankruptcy process seeks offers for the company’s assets more broadly. Character.ai has asked the court to approve bidding procedures and designate Disney as stalking-horse purchaser for certain assets.
Character.ai seeks a court-supervised sale
Character Technologies filed its voluntary Chapter 11 case in the U.S. Bankruptcy Court for the District of Delaware. Character.ai said the filing was intended to facilitate a sale of all or substantially all of its assets. Its proposed bidding procedures are designed to seek the highest or otherwise best offers, the company said.
Colin Adams, Character.ai’s chief executive, said the company had faced significant legal, regulatory and operational headwinds over the past year. He said the board had reviewed its alternatives and decided that a court-supervised sale offered the best opportunity to maximise value for stakeholders.
The company said it expects its business, including the Character.ai platform, to operate with minimal service disruption while bids are considered. It has filed initial motions seeking court permission to continue paying employee wages and benefits, meet commitments to platform users, and pay vendors and partners for obligations incurred after the filing.
Those operating measures depend on court approval, according to Character.ai. The company also said the platform would be wound down if the sale process failed to produce a purchase that provided for its continuation. That condition leaves the platform’s operation beyond the sale process dependent on the terms of an eventual purchase.
Character.ai targets a late-2026 closing
Character.ai’s proposed bidding timetable covers both the sale process and the closing of any transactions that result from it. Disney’s agreement sets an initial bid for some of the company’s assets, while the court process allows competing offers to be considered before any resulting transaction closes.
Character.ai expects to complete the sale process and close any resulting transactions in late November or early December 2026, under the timetable in its proposed bidding procedures.
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