The group fighting the proposed sale of Topps wrote company shareholders a long letter Thursday, offering up their new name and taking a few Disney-themed snipes at the deal they’re trying to overturn.
You can’t say they don’t have a sense of humor.
Crescendo Partners, the group attempting to foil the proposed merger agreement that will push Topps into private hands, has filed materials with the Securities and Exchange Commission as it prepares to formally oppose the deal.
The group calls itself "The Committee to Enhance Topps" and is made up of the three members of Topps’ Board of Directors who have been outspoken in their desire to turn the sportscard maker in a new direction.
In a letter sent to Topps shareholders, the group stated the price of $9.75 per share offer the board voted to accept last month was a "Mickey Mouse-like 3%" premium over the average closing price of Topps stock in the three weeks leading up to the merger agreement. There was also a pointed, but tongue-in-cheek reference to Uncle Scrooge later in the letter
The group owns 2.5 million shares of Topps common stock. If they can thrwart the deal, the Committee pledges to nominate "highly qualified business executives" to replace some current members of the Topps board, elect a new CEO and attempt to hold a "Dutch Auction" to buy back $110 million worth of stock at $10 to $10.50 per share.
Here’s a copy of the letter:
April 26, 2007
Dear Fellow Topps Stockholder:
The Committee to Enhance Topps (the "Committee") is a significant
stockholder of The Topps Company, Inc. ("Topps"), owning approximately 6.6%
of its outstanding common stock. We are writing to our fellow stockholders
because Topps has entered into an ill-advised agreement to be acquired by
entities controlled by Michael D. Eisner and Madison Dearborn Partners, LLC
at a price of $9.75 per share. We are strongly opposed to the acquisition
of Topps because, among other things, the proposed price to be paid for
your Topps shares is inadequate and there are better choices available for
maximizing stockholder value.
The Committee Strongly Opposes the Inadequate $9.75 Proposed Offer
We believe that the proposed acquisition is not in the best interest of
Topps stockholders. We are strongly opposed to this transaction. Consider
1) The $9.75 per share merger consideration proposed to be paid by Mr.
Eisner and his partners to the Company’s stockholders is inadequate.
It does not fully reflect the intrinsic value of your Company’s shares.
— The price presents only a Mickey Mouse-like 3% premium to the
average closing price of Topps’ shares for the 20-trading days
preceding the signing of the merger agreement.
— Since the date the merger agreement was signed, the Company’s stock
has been consistently trading at prices higher than the proposed
$9.75 per share offer price, trading as high as $10.17 on April 19,
— The Company fails to tell you that the most recent proposed stock
repurchase program that was approved by the Topps Board for the
period September 2005 through September 2006 had a top price of
$10.62 per share. The Committee does not understand how management
and the Topps Board on the one hand can recommend buying shares up
to $10.62 per share, but on the other hand approve the sale of the
Company at $9.75 per share, particularly given the improvements in
the Company’s financial performance in the first three quarters of
fiscal year 2007.
2) A better alternative exists for maximizing stockholder value.
— If the merger is voted down, we intend to nominate a slate of highly
qualified business executives to replace the members of the existing
Topps Board. Our nominees will be dedicated to acting in the best
interest of all Topps stockholders and will take all necessary steps
to maximize stockholder value.
— As a first step, we would recommend a modified "Dutch Auction"
tender offer be conducted to buy back $110 million of shares between
$10.00 to $10.50 per share. Such a tender offer would have multiple
advantages, which include (i) fixing the capital structure by
placing a limited amount of debt on the Company, (ii) providing
current liquidity to investors at a higher price per share than the
proposed merger and (iii) providing long-term stockholders the
ability to participate in the Company’s future growth in a more
— We believe that the Company should hire a new CEO with extensive
marketing and turnaround experience, and who would bring a fresh
perspective to the organization in order to improve the operations
of the Company. It is time to end the nepotism at Topps, which we
believe is the driving force behind senior management’s failure to
take advantage of new business opportunities.
— The Company has just started to reap the benefits of its turnaround
plan. Why let Mr. Eisner and his cohorts receive the benefits of the
wide range of business opportunities available to the Company? It
is time to stop private equity firms from taking value away from
3) The process that led to the signing of the Merger Agreement was
— The Topps Board did not shop the Company prior to signing the Merger
Agreement and thus failed to maximize the competitive dynamics of a
sale transaction that could have garnered the highest price possible
for the Company.
4) The deal-protection terms of the "go-shop" provision under the
Merger Agreement do not provide for a sufficient, post-signing
— The Committee believes that the terms of the "go-shop" provision
under the merger agreement were designed to deter rather than
encourage the solicitation of alternative proposals. Therefore, we
believe that any implication by the Company that contacting more
than 100 companies during the "go-shop" period provides for a
substantial post-signing market check is a ‘smokescreen.’
— You should know that the Topps Board ceased negotiations and
discussions with a potential bidder that had offered to pay $10.75
per share, a 10.3% premium to Eisner’s inadequate offer. The Company
ceased negotiations and discussions with the bidder using as a
convenient excuse the restrictive "go-shop" provision in the merger
agreement. This does not appear to the Committee to be an effective
post-signing market check.
Not only does the $9.75 offer price fall short, but so does the process
utilized in arriving at the price.
Because the Topps Board failed to maximize value for all Topps
stockholders, on April 26, 2007, we filed preliminary proxy materials with
the Securities and Exchange Commission to formally oppose the merger
proposal and Eisner’s Uncle Scrooge-like offer. We are not seeking your
proxy at this time, but after we file our definitive proxy material, we
will be sending you our proxy statement and GOLD proxy card. If you receive
Topps’ white proxy card, please do not vote the white proxy until you have
had a chance to review our solicitation materials.
If you have any questions, please feel free to call us directly at
(212) 319-7676. You may also call D.F. King & Co., Inc., which is assisting
the Committee, toll-free at (800) 628-8532.
Eric Rosenfeld & Arnaud Ajdler
The Committee to Enhance Topps
On Thursday, Topps declared a quarterly cash dividend of $.04 per share.
More on the fight over the sale and an apparent bid by Upper Deck that was recently rejected by the other members of the Topps’ Board.