Topps Buyout Gets Sticky for Eisner & Co.

Shareholders are up in arms over a proposed takeover of the baseball-card outfit by a group including the former Disney chief

The Topps Company (TOPP) finds itself in a sticky situation with big shareholders -- and faces the complaint that it's selling itself too cheaply -- after the candy and sports card maker said Mar. 6 that it signed a $385 million deal to be taken over by former Disney (DIS) CEO Michael Eisner's investment outfit, The Tornante Company, and private equity firm Madison Dearborn Partners.

Under the terms of the agreement, Topps stockholders will receive $9.75 per share in cash. The buyout group chose to move after the stock price had fallen from its high of the year at $10 on Feb. 2. The company's shares climbed 10.1% to $9.81 in heavy trading on the Nasdaq Mar. 6.

Selling baseball cards isn't the same fun for Topps that it used to be, as modern kids get distracted by video games and the Internet. But Topps also makes money on products like Bazooka bubble gum and Ring Pops. In an effort to improve its business, Topps hired Lehman Brothers in 2005 to figure out whether and how it should sell (see, 7/12/05, "What's in the Cards for Topps?"). The company's agreement with Torrance et al. remains subject to approvals and is expected to close sometime between early July and late September.

“Over the past two years, with the assistance of Lehman Brothers, we’ve tried to examine all our opportunities and no other superior proposal has emerged in this time frame,” said a spokeswoman from Topps. “In our opinion, the idea suggested by the dissidents [shareholder activists] would not result in greater value for stockholders.”

Topps CEO Arthur T. Shorin is under pressure from shareholders who have agitated for change. In the summer, the hedge funds Crescendo Partners and Pembridge Capital got their respective people -- Arnaud Ajdler, Timothy Brog, and John J. Jones -- onto Topps' board, at the same time the company agreed to expand the number of board seats from nine to ten.

Now when the board voted on the offer from Eisner, only Topps' three new members opposed. Crescendo's director Arnaud Ajdler promised to campaign against the deal in a Mar. 6 letter to Topps board, criticizing them for not shopping the company around and for agreeing to sell at less than fair value.

Topps is still planning to solicit superior proposals from third parties during the next 40 days.

"This will be a change in ownership, not a change in direction. We look forward to working with an experienced group of investors who understand the creative aspects of our business and are committed to our continued growth," CEO Shorin said in a press release March 6.

Eisner had founded Tornante in 2005 to incubate media and entertainment companies. Perhaps the veteran exec can help unwrap Bazooka Joe's hidden potential.

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