Major league headache(2)

A seemingly straightforward buyout of baseball trading card company Topps prompted a bidding war peppered with several vitriolic letters and a judicial condemnation.

Earlier this week sports memorabilia maker Upper Deck withdrew its tender offer of around $425 million (€314 million) for the outstanding shares of the Topps Company, which had previously agreed to a $325 million buyout with Madison Dearborn Partners and Tornante Company.

Upper Deck’s discussions with Topps had become increasingly hostile, and in its final salvo, Upper Deck accused Topps of deliberately frustrating the process in order to pursue an inferior bid for the benefit of its management team.

Upper Deck made its $10.75 per share bid two months after Topps – the maker of Major League Baseball trading cards and candy including Bazooka bubblegum – had agreed to be acquired for $9.75 per share in cash by Madison Dearborn and Tornante, the investment company of former Disney chief executive Michael Eisner.

At the time of the original merger agreement, Topps had 40 days to solicit alternative offers.

When Upper Deck made its bid, Topps directors told the company’s shareholders

It is Topps, not UD, which is responsible for this cynically contrived game of cat-and-mouse.

Upper Deck

to vote against the offer because of concerns that the proposed merger would be halted on antitrust grounds. However the antitrust waiting period expired earlier this month without government intervention.

Days later, Topps sent Upper Deck a letter criticising Upper Deck’s failure to “promptly attempt to finalize a definitive agreement with Topps despite repeated requests” and suggested that Upper Deck was trying to change the structure of the deal to obtain cheaper debt financing.

Upper Deck responded with a letter that said it was terminating its bid because Topps “steadfastly refused to disclose information crucial to UD’s due diligence” in order to “promote the Tornante/Madison Dearborn merger favored by Topps’ entrenched management”.

“It is Topps, not UD, which is responsible for this cynically contrived game of cat-and-mouse,” Upper Deck said in the letter.

Upper Deck also said it would reserve its rights to “seek redress against Topps and those responsible for the collapse of this transaction, which would have been in the best interest of Topps’ shareholders…the people to whom you owe a fiduciary duty.”

The Delaware Court of Chancery has also condemned Topps’ treatment of its shareholders. Vice Chancellor Leo Strine issued a court opinion that the management team of Topps had breached its fiduciary duty by not disclosing enough information to shareholders about possible incentives it had agreed to for the proposed deal with Madison Dearborn and Tornante.

A shareholder vote on the Madison Dearborn/Tornante bid was scheduled for 30 August, but was recently rescheduled for 19 September.