bloggingbuyouts

One of the more depraved sagas in our nation's long and pathetic history of corporate governance has come to a close.

Topps (NYSE: TOPP), a maker of sports cards and candy, says that shareholders have approved a $9.75 per share offer from Madison Dearborn Partners and Tornante, a private equity firm controlled by Michael Eisner.

Upper Deck had offered $10.75 per share in a hostile offer, but finally withdrew the offer last month, saying the following:

...roadblocks have been created by Topps as part of a deliberate effort to discredit UD (both publicly and internally with the Topps employees upon whom UD would need to rely post-closing of this acquisition), defeat UD's offer, and justify entrenched management's continued shameless support of the less favorable Tornante/Madison Dearborn transaction. It is now abundantly clear that Topps will attempt to impede any and all reasonable efforts to consummate the UD merger, which thus cannot possibly be consummated under the current circumstances...

Although relatively small in size, the Topps buyout presented as much drama as any recent takeover battle. The company had been underperforming for years, had several angry activist hedge funds pushing for chance. When it accepted the offer from Tornante, it insisted that it was in the best interests of shareholders -- in fact it was better than offer that was more than 10% better!

Then Topps forgot to disclose that, oh, by the way, the CEO would get to stay on as a consultant newly-private company, although many shareholders had been calling for their heads for years. After a judge chastised them, they disclosed the conflict of interest in an 8-K filing.

Someday, Topps will be a Harvard Business School case study on incompetent management and bad corporate governance.

Three proxy advisers have now spoken out against the $9.75 private equity offer for Topps Company Inc (NASDAQ: TOPP). What an ugly mess this has become -- playing out much more like a soap opera than a day at the ballpark. Let's review:

• In March, Topps gets an offer to be acquired for $9.75 a share from an investment group led by Michael Eisner's Tornante Co. and Madison Dearborn Partners.
• Topps agrees to the offer.
• In May, Upper Deck steps to the plate with a $10.75 a share counter offer.
• Yesterday, Upper Deck withdraws its offer based on "flawed" negotiations from Topps.
• Topps files with the SEC today, saying Upper Deck misled the company with its offer.

Topps is now due to vote on the original offer from the investment group, but three proxy adviser firms -- Proxy Governance, Institutional Shareholder Services and Glass Lewis & Co, have all recommended rejecting the deal.

Wedbush Morgan said in June that they believe Topps shares are worth between $11.50 a $12.00. With that in mind, along with the proxy firms' lack of support, the chances of this deal getting done for under $10 a share are not looking realistic.

In a letter sent to its stockholders, trading card and dusty bubble gum giant Topps Inc. (NASDAQ: TOPP) is recommending its shares' owners approve a $385 million buyout bid from Madison Dearborn Partners and financier Tornante Co., run by former Disney (NYSE: DIS) head Michael Eisner.

Shareholders likely have some immediate and obvious concerns. For starters, the Tornante/Madison Dearborn offer pays $9.75 per share -- a quarter less than today's closing price of $10 even (TOPP spent most of Friday's session higher before turning down in midafternoon, closing 13 cents lower).

What's worse, the recommended deal is $1 less than an outstanding bid from privately-held rival Upper Deck. In today's letter, Topps explains:

"...the Company and its representatives continue to negotiate with the Upper Deck Company to see if a consensual transaction can be reached with respect to its $10.75 Tender Offer. However, in spite of the Board's best efforts, we have not reached a consensual transaction with Upper Deck to date..."

As BloggingBuyouts' Zac Bissonnette has noted earlier, Topps management's hangup with the Upper Deck bid is that the offer does not guarantee they'll keep their jobs -- an upside to the Eisner bid that Topps fails to mention to shareholders.

In fact, it seems Topps has failed to mention a lot to its shareholders, or so The Committee To Enhance Topps claims. The committee is comprised primarily of Delaware-based Crescendo Partners and its personnel, who collectively own about 7% of outstanding TOPP shares. Its SEC filing yesterday summarizes the multiple class-action suits against Topps and its directors, accusing the board of "'half-truths' and misleading disclosure" in its proxy statements.

"Do NOT gamble with your investment in Topps," Topps instructs shareholders, urgently noting that the Tornante/Madison Dearborn deal is in the can, just waiting to be approved. Topps shareholders vote on the deal August 30 -- will they play the safe bet?

The saga of the Topps (NASDAQ: TOPP) buyout has dragged on far longer than anyone could have predicted. When the trading card company agreed to be acquired by Madison Dearborn Partners and Michael Eisner's The Tornante Company for $9.75 per share, BloggingStocks' Tom Taulli wrote that Topps had hit a single. He wasn't the only one who was less than enthused about the buyout. Several dissident Topps directors voted against the deal, and Topps responded by barring them from the go-shop process. Then Upper Deck made an offer of $10.75, and Topps rejected it, saying that Upper Deck didn't have financing and that the proposal had antitrust concerns. Upper Deck responded with a hostile tender offer.

Given the size of the buyout -- less than $420 million -- the deal has generated a lot of buzz. Perhaps it's that so many of us covering the deal have nostalgic memories of collecting our baseball heroes. But the level of rhetoric and the amount of back and forth has also made the deal interesting.

It's hard to know exactly how this will end -- will Eisner & co. raise their bid? The matter has ended up in court with a judge chastising Eisner and Topps with good reason -- the company forgot to tell shareholders that Eisner had agreed to keep the much-maligned current management team in place after the buyout.

BusinessWeek's Ronald Glover takes an interesting look at Michael Eisner's role in this whole mess, referring to him as the "drive-by victim of what's fast becoming a shareholder circus".

At this point, I would say that Upper Deck looks like the favorite to go home with Topps. The shares are trading at $10.59, indicating that shareholders are confident it won't go for the original $9.75 offer. The small spread between the current price and Upper Deck's offer indicates that investors believe an even higher offer could emerge.

The BusinessWeek piece cites sources who say that Eisner is unlikely to raise his offer, but it might be a mistake to count him out just yet.

As for his show on CNBC, I think you probably can count that one out. He's no Larry King, although King was recently a guest on the show.

Topps's (NASDAQ: TOPP) deal to be acquired by private equity firms continues to generate angst from some of its largest shareholders. Hedge fund Crescendo Partners argued that the company's CEO, Arthur Shorin had a conflict of interest in negotiating with Upper Deck, a competitor who has made an offer for the company, because Shorin "does not want to see the company started by his father and uncles fall into the hands of a longtime rival."

Today Arnaud Ajdler, Crescendo's managing partner and a director at Topps, delivered a letter to the company's board, "in response to certain false and misleading statements included in a letter from Arthur Shorin, Topps' Chairman and CEO, to Mr. Ajdler dated May 31, 2007." Here are some of the highlights:

Finally, in your communications, you like to repeat that Crescendo wants to take over Topps without paying stockholders for their shares. Once again, you are misleading your stockholders. When a buyer wants to take a company private, as Mr. Eisner and Madison Dearborn are attempting to do, the buyer pays stockholders a premium for their shares. While this premium is typically 20 to 30%, you have approved a transaction that would pay stockholders a meager 3% premium and a significant discount to where the shares are currently trading... If the ill-advised Eisner merger is voted down, Crescendo will ask its fellow stockholders, the true owners of Topps, to replace seven of the incumbent directors on the Board with a new slate... As detailed in our proxy statement, we believe that the Company could be worth conservatively between $16 and $18 per share if managed properly.