Disney Circles Character.ai as Chapter 11 Bankruptcy Filing Chatbot Company Documents

The entertainment giant that recently hired the former CEO of an AI company is bidding on the pursuit horse in the proceedings over specific assets.

The Walt Disney Company is closing in on a new artificial intelligence deal.

, the artificial intelligence chatbot company, is filing for Chapter 11 bankruptcy protection and says Disney is a stalking horse bidder for some of its assets.

Founded by former Google engineers, the tech company used artificial intelligence to allow users to create and interact with chatbots. Recently, it has started using artificial intelligence to create small dramas.

Disney Worldwide Services, a subsidiary of the entertainment giant, is pledging $20 million to be the stalking horse bidder "for a non-exclusive perpetual license to certain of the Company's intellectual property and certain of the Company's claims."

Disney hired former CEO Karandeep Anand to become CTO last month, and the company said at the time that some of the startup's employees would join him. The tech company said in the bankruptcy filing that the former employees will help provide transition services, and "these transition services will help the company operate safely using its platform for a limited period of time and support its sales process."

The bankruptcy auction is expected to end in late November or early December, and there's no guarantee that Disney will emerge as the winner of the assets it's bidding for, although as the stalking horse it has the right to match a deal, among other rights. The document shows that its biggest creditor is Google, which owes it more than $4 million.

"After a comprehensive review of available options, the board determined that this court-supervised sale process provided the company with the best opportunity to maximize value for all stakeholders," said CEO Stekalyn Adams in a statement. As we navigate this process, maintaining a safe and engaging user experience for our community remains a top priority."

If Disney is successful in the bid, it would gain access to Character's AI avatar technology, giving it a foothold in the space as it seeks to find new forms of interaction. Last year, Disney struck a deal with OpenAI to let users create videos using its Sora software, before the AI company shut it down and the deal fell through. The move shows it still has a desire to bring AI to its platforms.