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Fanatics-Panini Battle Hinges on $100M Buy Into Texas Card Printer

eben novy-williams
·5 min read

A relatively unknown Texas-based trading card manufacturer is caught in the crosshairs of the ongoing legal battle between Fanatics and Panini.

Last year, Fanatics quietly made a pair of investments into GC Packaging (GCP), which valued the company at roughly $100 million, according to someone with knowledge of the terms. The deals gave Michael Rubin’s company and its nascent trading card empire a significant majority stake in one of the industry’s main sources for card printing and packaging. It also caught the attention of Panini, GCP’s largest client and Fanatics’ main rival in U.S. trading cards.

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In competing lawsuits filed in the past week, the two sides took very different views on Fanatics’ investment and what it means for other trading card companies that utilize GCP’s services. Panini claims the deal has undermined its business; Fanatics claims it has improved the experience for all GCP clients. How judges interpret those arguments could play a large role in determining how the U.S. trading card landscape unfolds over the next decade.

Representatives for Fanatics and Panini declined to comment. Messages left at GCP via the company’s phone number and email address weren’t returned.

Founded in 1976 by John Tinnon, GCP has spent the past few decades as an increasingly important part of the card industry. Tinnon, who passed away in 2020, is considered by many to be a pioneer in graphic arts finishing. He started with the craft when he was 10 years old, worked in the industry through school and financed GCP’s launch via a $10,000 loan from a friend, according to a 2007 profile in Inside Finishing magazine.

The company grew gradually over time and began prioritizing trading cards in the late 1980s. That business was spurred by acquisitions, according to the magazine, including the purchase of Upper Deck’s manufacturing operations in 1997 and, later, the trading card division of Great Western Industries. The company’s current services include printing, laminating, stamping, embossing, wrapping and packaging.

GCP’s longstanding place at the heart of the trading card industry points toward the technical know-how needed to create increasingly intricate collectibles in timely and reliable fashion—and to the degree to which sports card manufacturing remains a relatively small niche in the wider world of consumer products. Panini uses GCP for more than 90% of its card requirements; Topps (now owned by Fanatics) relies on the company to produce about 40% of its cards.

Fanatics’ growing trading card business burst onto the scene in August 2021 when it secured long-term exclusive licenses from the NBA, NBPA, MLB, MLBPA and NFLPA, all of which were previously held by industry incumbents Topps and Panini. Five months later, Fanatics bought Topps for $500 million, roughly a third of the valuation that the company held in acquisition talks with a SPAC less than a year prior.

The GCP investments happened after those moves. Fanatics said in its lawsuit earlier this week that it made the acquisition to “shore up manufacturing issues” impacting itself and others in the industry. Those problems included quality concerns, order volume constraints, delivery issues and theft, many of which were exacerbated as interest in trading cards soared during the COVID lockdown. The lawsuit says GCP was late on more than 70% of its jobs in the fourth quarter of 2020, a number that increased in early 2021.

The investment tracks with Rubin’s approach to his core merchandise and e-commerce business. Fanatics became the world’s largest seller of licensed sports apparel not just by partnering with scores of leagues, teams and governing bodies, but also by controlling as many parts of the manufacturing-to-shipping process as possible. The company refers to that advantage as “vertical commerce,” and it’s been opportunistic using MNA to bolster its position. In 2017, for example, Rubin’s company purchased Majestic, a transaction that included the Pennsylvania plant that manufactures official MLB jerseys and other fan gear.

According to Panini, Fanatics has used its control of GCP to “undermine” its rival’s business. Panini claimed in its lawsuit last week that GCP has cut the number of machines working on its product to roughly half and scaled back its planned product releases with little advanced notice. (Panini also claims GCP has access to some of its trade secrets, and that the Fanatics investment was a violation of GCP’s contract with Panini, which included a change-of-control provision.)

“Through acquiring control of GCP, Fanatics now controls the critical means of manufacturing Panini’s trading cards and has been exercising that control to harm Panini and other competitors,” the company said in its lawsuit.

According to Fanatics, its GCP acquisition has benefited the entire industry, including Panini. The company says GCP’s security and quality control has improved over the past two years, and that production capacity has increased 33% to 400 million packs per year. Panini’s share of that output has grown from 49% (of the ~300 million) to 61% (of the 400 million), the lawsuit says. (It’s unclear if those two statistics—Panini’s claim about the machines and Fanatics’ claim about the rising share—can both be accurate.)

“Fanatics’ investment in GCP,” the lawsuit says, “has been improving the quantity, quality and security of GCP’s production, and, in fact, has even expanded GCP’s facilities, all for the benefit of collectors and the industry as a whole.”

For now, Panini may have limited options if it wants to source product from a company independent of its rival. Its lawsuit asks the court to order Fanatics to divest of its controlling stake, but it also says that GCP is “the only manufacturing provider able to meet Panini’s technological quality and capacity requirements.” For now, according to a source familiar with the plans, the company has no plans to move the bulk of its manufacturing elsewhere.

With assistance from Jacob Feldman.

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