In Re Topps Company Shareholders Litigation

Facts

Topps (D) makes baseball and other cards. D distributes Bazooka bubble gum and other old-style confections. Arthur Shorin, the son of Joseph Shorin, one of the founders of D and the inspiration for 'Bazooka Joe,' is D's current Chairman and Chief Executive Officer. Shorin has served in those positions since 1980 and has worked for D for more than half a century, though he owns only about 7% of D's equity. Shorin's son-in-law, Scott Silverstein, is his second-in-command, serving as D's President and Chief Operating Officer. Market capitalization is less than a half billion dollars, and its financial performance has, as a general matter, flagged over the past five years. Insurgents were unhappy and about to lose reelection, Shorin cut a face-saving deal, which expanded the board to ten and involved his re-election along with the election of all of the insurgent nominees. Before the revolt, Michael Eisner had called Shorin and offered to be 'helpful.' Almost immediately after taking office, the insurgent directors and the incumbent directors began to split on substantive and, it is fair to say, stylistic grounds. Eisner was on the scene, expressing an interest in making a bid. Two other financial buyers also made a pass. The other bidders dropped out, and Eisner was told by a key Incumbent Director that the Incumbent Directors might embrace a bid of $10 per share. Eisner later bid $9.24 in a proposal that envisioned his retention of existing management, including Shorin's son-in-law. Eisner was willing to tolerate a post-signing Go Shop process, but not a pre-signing auction. The dissent directors wanted a public auction and disapproved. An independent director took up the negotiating oar and reached an agreement with Eisner on a merger at $9.75 per share. D had a chance to shop the bid for 40 days after signing, and the right to accept a 'Superior Proposal' after that, subject only to Eisner's receipt of a termination fee and his match right. The Board approved the deal with Incumbent Directors all favoring the Merger, and the Dissidents all dissenting. Shortly before the Merger Agreement was approved, The Upper Deck Company (P) expressed a willingness to make a bid. D signed the Merger Agreement with Eisner without responding to P's overture. By the end of the Go-Shop period, P had expressed a willingness to pay $10.75 per share in a friendly merger, subject to its receipt of additional due diligence and other conditions. The D board decided not to continue negotiations. After the end of the Go-Shop period, P made another unsolicited overture, expressing a willingness to buy Topps for $10.75 without a financing contingency and with a strong come hell or high water promise to deal with manageable (indeed, mostly cosmetic) antitrust issues. The penalty fee for failure was the same as Eisner’s. The D Incumbent Directors refused to treat P as having presented a Superior Proposal, a prerequisite to putting the onus on Eisner to match that price or step aside. D went public with a disclosure about P's bid, but in a form that did not accurately represent that expression of interest and disparaged P's seriousness. D had required P to agree to a contractual standstill prohibiting P from making public any information about its discussions with D or proceeding with a tender offer for D shares without permission from the D board. D refused to allow P to make a tender offer and to tell its side of events. A vote on the Eisner Merger was scheduled to occur within a couple of weeks. Ps moved for a preliminary injunction. Ps contend Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc. prevent D from denying the stockholders the chance to make a mature, uncoerced decision for themselves.

Issues

Rule of Law

Holding and Decision

Legal Analysis

© 2007-2024 ABN Study Partner.