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Topps Upstarts Vow New Blood on Board

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The Clantons have staked out the OK Corral and the Earps are coming. Once the smoke clears, who will rule the roost at Topps?

A vote on the attempted buyout of the Topps Company by private equity groups headed by Michael Eisner is just four weeks away. On Wednesday, the dissident shareholders who sit on the Board of Directors promised to try and boot the other board members off the cardboard island if the merger bid fails.

The group plans to nominate an entire new slate of candidates to the Board as it attempts to change the company’s direction and accused Topps leadership of having no interest in a merger with Upper Deck.

"We have assembled a slate of highly qualified director nominees who collectively have vast expertise in several areas, including entertainment, confectionary, strategic turnarounds, marketing, brand management and sports management, and who, if elected, are committed to taking all actions necessary to improve the Company’s business operations and to maximize stockholder value," stated 31 year-old Arnaud Ajdler, a managing director of Crescendo Partners.

Ajdler then fired off a letter saying the current Topps Executive Committee members in charge of the sell-off have no interest in a merger with Upper Deck, accusing them of having a conflict of interest:

Ajdler wrote: "Arthur Shorin, in my opinion, does not want to see the company that was started by his father and uncles fall into the hands of long-time rival, Upper Deck, since a transaction with Upper Deck would end the family connection with Topps and in all likelihood would prevent Scott Silverstein, Mr. Shorin’s son-in-law, from becoming the next CEO of Topps (with the obvious financial implications that this implies). — Allan Feder is a former employee of Topps and a long-time family friend of Mr. Shorin. Mr. Feder has very limited deal experience (which did not seem to prevent the Board from selecting him as the lead negotiator on the Eisner deal) and has told me in the past that he does not believe that a deal with Upper Deck is possible. — Jack Nusbaum is a long-time friend of Arthur Shorin and serves as Chairman of Willkie Farr & Gallagher LLP, which in turn serves as Topps’ outside law firm. Willkie Farr advised the Topps Board with respect to the merger agreement with Michael Eisner and Madison Dearborn and is currently providing advice to the Executive Committee with regard to Upper Deck’s offer. In light of these relationships, I do not understand how either Mr. Nusbaum or Willkie Farr can be expected to render independent judgment in connection with the Upper Deck negotiations.

I was also deeply troubled to learn that the Executive Committee met with the Company’s advisors just before Topps’ most recent Board meeting on May 23 held to discuss the Upper Deck situation. Why did the Executive Committee members need to hold a meeting right before the meeting of the full Board? I suspect that the purpose of the meeting was to ensure that the members of the Executive Committee are on the same page and vote accordingly. What is the point of calling a Board meeting if the decisions have already been made by the five members of the Executive Committee? The actions of the Executive Committee continue to violate the most basic principles of corporate governance.

Finally, in the merger proxy statement, letters to stockholders and statements to the press, the Company continues to mislead stockholders and allege that a thorough and multi-year evaluation of the Company’s strategic alternatives was conducted and that no better offers emerged. Yet you never once contacted Upper Deck to see if there was any interest in combining the two companies to maximize stockholder value, despite your knowledge that there was interest on Upper Deck’s part. How is this consistent with your public comments and disclosure of a thorough and multi-year process? Now, if a transaction with Upper Deck is reached, a break up fee and expenses of $16.5 million, equal to approximately 5.6% of the transaction value, will have to be paid. This represents slightly more than 40 cents per share that could have been paid to stockholders instead of to Mr. Eisner.

As I have been telling you for many months, it is time for Topps to be run for the benefit of its public stockholders instead of being run like a private club."