Court Sends Topps Deal Into Extra Innings

Target: The Topps Co.

Price: $9.75 per share ($385.4 million)

Sponsors: Madison Dearborn Partners, The Tornante Co

Rival Sponsor: Upper Deck Co.

Rival Offer: $10.75 per share ($424 million)

The $385.4 million agreement that Madison Dearborn Partners and Michael Eisner’s Tornante Co. reached to acquire The Topps Co. last March has stalled in a court decision that could give a once-rejected suitor anther crack at the bat.

On June 14, the Delaware Chancery Court prohibited the iconic maker of baseball cards from holding a stockholder meeting to vote on the $9.75 per share take-private transaction.

The enjoinment comes after Topps was sued earlier in June by rival Upper Deck Co., which made a $10.75 per share ($424 million) counteroffer for Topps shortly after the Madison Dearborn-Tornante deal was announced. That bid was ultimately rebuffed by the Topps board for a number of reasons, including potential regulatory issues.

However, Upper Deck accuses Topps of fraudulently encouraging it to enter into a confidentiality agreement regarding its offer, through which Upper Deck entered a standstill agreement that prevented it from making a tender offer for Topps shares. Upper Deck claims that certain directors at Topps breached the confidentiality agreement, and that it should no longer be held to the standstill agreement.

In its June 14 decision, the Delaware court released Upper Deck from its standstill obligations, allowing the company to communicate directly with Topps stockholders in pursuit of a tender offer. “We are very happy with the ruling and we will continue to move forward,” said Bruce Silverstein, partner with Young Conaway Stargatt & Taylor LLP, the law firm representing Upper Deck. Silverstein declined to comment further.

In a prepared statement issued June 18 by Topps, the company said it has not withdrawn or amended its recommendation in favor of the Madison Dearborn-Tornante deal. At press time, Topps shares were trading at $10.28 per share, well above the original deal’s offering price.

Calls to Madison Dearborn were not returned. A spokesperson for Topps declined to comment beyond the prepared statement.

Upper Deck originally approached Topps with its $10.75 per-share offer during a 40-day go-shop period, which expired on April 14. According to a May 31 letter from Topps Chairman and CEO Arthur Shorin, Upper Deck “failed to provide any evidence of financing” and the “proposal still had other significant issues.” Discussions ended.

Six weeks later, on May 21 Upper Deck approached Topps again with the same offer, this time with a “highly confident” letter from a commercial bank, Shorin wrote. Shortly thereafter, Madison Dearborn and Tornante gave Topps permission, at the company’s request, to engage in discussions with Upper Deck. The two companies reportedly signed the confidentiality agreement in March.

On May 24, Topps said in a statement that there were still outstanding issues to resolve associated with the rival offer, including an insufficient breakup fee and an unwillingness by Upper Deck to assume a sufficient share of regulatory risk.—A.N.