bloggingbuyouts

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.

When BloggingStocks's Tom Taulli wrote that Topps (NASDAQ: TOPP) had hit a single with its agreement to be acquired by Madison Dearborn Partners and The Tornante Company, he realized a problem with the proposed buyout that has come to irritate many of the company's largest shareholders. The $9.75 per share offer wasn't much of a premium to the current share price, and left the company's long-term shareholders with a return on investment that was mediocre at best.

Then a grey knight arrived on the scene. Competitor Upper Deck came forward with an offer of $10.75 per share, but Topps rejected the offer, saying that Upper Deck had not demonstrated adequate financing and had failed to offer an adequate break-up fee. Topps also cited anti-trust concerns given that Topps and Upper Deck are the two biggest players in the trading card industry.

Having been spurned by Topps's management, Upper Deck is turning up the heat with a tender offer for all of the company's shares at $10.75 each, a premium of 10.25% to the $9.75 that Topps had previously agreed to be acquired at.

There's sure to be a lot more drama to come and the history of Topps had plenty of drama before this even started. Check out this Wikipedia entry for a nice overview of the company's history.