Statement reveals "competitor" launched a late bid at higher price per share, but was rejected.
According to Topps’ latest proxy statement, 107 potential new bidders emerged following the company’s decision to enter into a merger agreement with a group headed by former Disney chief Michael Eisner. Topps claims all but five never amounted to anything serious. A late entrant into the process, however, may have been Upper Deck.
The statement from Topps acknowledges a "competitor" made a $10.75 per share offer which was rejected Monday, in part because Topps didn’t feel confident the buyer had the money .
Topps does not include the name of the proposed bidder in the correspondence but does label it as a "competitor in the entertainment industry". Topps’ trading card division makes up the bulk of its entertainment sector and Upper Deck is considered a primary competitor.
On March 6, Topps entered into a merger agreement with Eisner’s Tornante Company and Madison Dearborn Partners LLC for a price of $385.4 million. As part of the agreement, Topps was given a 40-day "go shop" period in which to explore other offers.
In turning down the offer of $424.9 million believed to be from its California-based rival, the Topps’ Board cited "the lack of any evidence of the interested party’s financial capability to consummate a transaction, concerns regarding the likelihood that certain regulatory approvals of the proposed transaction would be obtained and the inclusion of a cap on the interested party’s liability with respect to its breaching of a definitive merger agreement."
The go-shop period expired at the end of last week. While still free to explore offers, Topps indicated it would not pursue further discussions with the company "unless it submits an unsolicited proposal that, subject to certain conditions specified in the existing merger agreement, our Board determines in good faith is or may reasonably be expected to result in a superior proposal to the transaction comtemplated by the Merger Agreement."
Topps appears to be focused on making the Eisner deal happen. In addition to its financing concerns, Topps states it also rejected the new bid because of "the risk that the transaction could be substantially delayed or prevented from being consummated due to the failure of all required regulatory approvals" and the bidder’s "unwillingness to assume sufficient risk as to the occurrence of such a failure".
Upper Deck is believed to have placed a $12 million cap on its liability in the event of its breaching of the definitive merger agreement. That, according to Topps’ Board, was insufficient given the fact that the proposed buyer "was a strategic, and not a financial, buyer." Because of those differences in the agreements offered, the offer of $1 per share more from the new bidder wasn’t viewed by the Topps’ board as a superior proposal.
Three Topps’ board members, Arnaud Ajdler, Timothy Brog and John Jones voted against approval and adoption of the merger agreement with Eisner’s group when it became public earlier this year. Immediately afterward, Ajdler expressed his dissatisfaction with the $9.75 per share cash merger consideration and the process leading up to the execution of the proposed sale.
Topps is recommending stockholders vote in favor of the sale to Eiser’s group because it doesn’t believe company stock will trade at $9.75 or better anytime in the near future. Since March of 2002, Topps stock has never traded above $11 and fell to a low of $6.99 in December of 2005. However, the three dissenting members of the Topps’ Board, and some other industry insiders believe the company’s stock is undervalued because of the poor performance of its leadership.
Shareholders will vote on the sale and the three dissenting Board members are believed to still be attempting to rally them to vote against the merger with MDP.
However, TheDeal.com, an online resource for corporate and financial dealmakers, quoted one source close to the situation as saying potential bidders have been scared off by Eisner’s participation. "People don’t want to go into a bidding war with Michael Eisner because Michael Eisner is a big guy with a lot of friends," The Deal quoted its unidentified source. "People don’t want to fight with him."
Topps says nine lawsuits have been filed against the company or its directors since the merger agreement was announced.