Topps' Governance Is Conflicted Over Takeover

The Topps Company, Inc. (TOPP) has been grappling with a conflicted takeover that seems to have gone on forever.

Yesterday management locked horns with Institutional Shareholder Services [ISS]. ISS has recommended against the "Tornante MDP transaction." Management recommends the proposed offer and is actually telling investors which color of proxy card they should sign.

ISS and many others are of the opinion that the Upper Deck offer is better. The rationale seems to revolve along that age old capitalist principal that the sale should go to the highest bidder. A quick review of TOPPS corporate governance guidelines indicates:

Director Responsibilities:

Directors must exercise sound business judgment and act in what they believe, in good faith, to be the best interests of the Company and its stockholders . . . .

Where is the board in all this? How do they justify selling the company to the "not highest" bidder?

Management is talking out of both sides of their mouth. They are exhorting shareholders to accept an inferior offer, while maintaining discussions with the superior offer.

As I am writing this post another proxy advisory firm (Glass Lewis) issues public comment criticizing management.

This one is a real mess and needs the scrutiny of regulators and judges. The best course of action is to vote no and reset the process. Shareholders' interests are not being well served.

Quoting from Glass Lewis press release:

In reaching its decision to recommend a vote AGAINST the Merger Agreement, Glass Lewis stated, "We are deeply troubled by the process the board undertook in arriving at the proposed deal, and agree with the Dissident that it did not constitute a full sales process. In our opinion, interested suitors are likely to put forward their best offers only when they are forced to compete. Here, we see that the board only held discussions and negotiations with three bidders, including Tornante-Madison Dearborn, and deliberately chose to refrain from initiating a public sale despite opposition from directors Ajdler and Brog. We believe this decision essentially precluded Topps from enjoying the benefits of true competitive bidding, a process which we believe likely to maximize shareholder value.