sec document
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /_/
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/_/ Preliminary Proxy Statement
/_/ Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/_/ Definitive Proxy Statement
/_/ Definitive Additional Materials
/X/ Soliciting Material Under Rule 14a-12
THE TOPPS COMPANY, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
PEMBRIDGE VALUE OPPORTUNITY FUND LP
PEMBRIDGE CAPITAL MANAGEMENT LLC
CRESCENDO PARTNERS II L.P. SERIES Y
CRESCENDO INVESTMENTS II, LLC
CRESCENDO ADVISORS LLC
ERIC ROSENFELD
TIMOTHY E. BROG
ARNAUD AJDLER
JOHN J. JONES
TOPPS FULL VALUE COMMITTEE
--------------------------------------------------------------------------------
(Name of Persons(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/_/ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
--------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------------------------
/_/ Fee paid previously with preliminary materials:
--------------------------------------------------------------------------------
/_/ Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
--------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
--------------------------------------------------------------------------------
(3) Filing Party:
--------------------------------------------------------------------------------
(4) Date Filed:
-2-
On May 17, 2006, the Topps Full Value Committee (the "Committee"),
together with the other participants (as defined below), made a preliminary
filing with the Securities and Exchange Commission ("SEC") of a proxy statement
and accompanying GOLD proxy card to be used to solicit votes for the election of
its slate of director nominees and certain non-binding business proposals at the
2006 annual meeting of stockholders (the "2006 Annual Meeting") of The Topps
Company, Inc., a Delaware corporation (the "Company").
Item 1: On May 18, 2006, the following news story was issued by
HedgeWorld.com:
PEMBRIDGE AND CRESCENDO FILE TOPPS PROXY
By Susan L. Barreto, Senior Financial Correspondent
Thursday, May 18, 2006
NEW YORK (HedgeWorld.com)--The final line in the Topps Full Value Committee's
press release sums it all up for dissident shareholders: "IT IS TIME FOR A
CHANGE."
Hedge fund firms Pembridge Capital and Crescendo Partners are asking
shareholders to approve changes in board seats, company bylaws and in ownership
in a preliminary proxy statement filed on May 17.
But as any activist hedge fund can tell you, effecting corporate change is never
easy, and the funds and managers who call themselves Topps Full Value Committee
are still in the early stages of their proxy fight with Topps Co. Inc., the
baseball card and confectionery company.
Members of the Topps Full Value Committee include Pembridge Value Opportunity
Fund LP; Crescendo Partners II LP Series Y; Pembridge Capital Management LLC;
Crescendo Investments II LLC; Crescendo Advisors LLC; Eric Rosenfeld, president
of Crescendo; Timothy E. Brog, president of Pembridge; Arnaud Ajdler, Crescendo
Partners' managing director; and John J. Jones, who was senior vice president of
Argosy Gaming Co. until its sale last October.
Messrs. Brog, Ajdler and Jones are seeking seats on Topps' board of directors to
combat what they say has been the steady deterioration of the company's income
over the last five years.
Mr. Brog said that the company has pushed off the date of its annual meeting to
late July. "The longer time goes by, the more event-driven hedge funds will get
involved."
One such fund is Mortar Rock Capital. Randy Saluck said he noticed the stock's
deterioration and saw that Mr. Brog had taken action. "It seemed to me if the
company could cut costs then you would have a cheap company with a good brand,"
he said, adding that he had raised the issue of costs in an April conference
call and found little motivation among Topps brass to remedy the situation.
In the preliminary proxy filing, the hedge fund activists criticized the
company's compensation structure and accused Topps Chairman and Chief Executive
Arthur T. Shorin of lying to shareholders in saying the company never paid
bonuses in 2006 when in fact Mr. Shorin received a $500,000 bonus. They say that
-3-
Mr. Shorin was paid $980,000 over the last three years, which is similar to
salaries of executives at multi-billion dollar companies such as Kraft, Hershey
and Wrigley's.
The filing also stated that Topps President Scott A. Silverstein is Mr. Shorin's
son-in-law, a fact that is disclosed on the Topps' investor relations web site.
The proxy is also seeking a change in the company by-laws to allow shareholders
that own 15% or more of the company to call a special meeting. The hedge fund
firms combined own 5.8% of Topps' outstanding stock. Crescendo only started its
buying spree in late April, while Mr. Brog has been pushing Topps to sell its
confectionery business for the past year Previous HedgeWorld Story.
Topps has denounced Pembridge's proposals as defective, contrary to Delaware
law, and called Mr. Brog's qualifications into question, citing his six years as
a corporate finance and mergers and acquisitions attorney. "We believe that
these defective proposals may be indicative of the level of care that Pembridge
has applied to its understanding of our Company," corporate officials said in a
statement.
Topps executives also raised doubts about board nominee Mr. Jones' integrity,
since he was the executive vice president and general counsel and corporate
secretary for RCN, which filed for Chapter 11 bankruptcy after his departure.
"We are not surprised that Topps' initial response to our nomination and
stockholder proposals has been focused on personal attacks rather than defending
the Company's financial performance," said Crescendo's Mr. Rosenfeld in a
statement. "We hope that the proxy contest will be focused on the real issue,
which is whether stockholders want a continuation of the status quo of poor
operating performance and a lagging stock price, or whether they want to elect
nominees committed to improving shareholder value."
Item 2: On May 2, 2006, the following news story was published by
HedgeWorld.com:
TOPPS PROXY CARDS HOT ITEMS
By Susan L. Barreto,
HEDGEWORLD.COM
NEW YORK (HedgeWorld.com)-- The nickname "The Little Hedge Fund That Did" may
have been prematurely won at Pembridge Capital Management, as it is now calling
in reinforcements in a renewed battle with the makers of Bazooka gum.
Although Pembridge repeatedly asked Topps Co. Inc. to lose the chewing gum last
year, it seems that management only stuck the bubblegum business underneath an
expanding line-up of children's novelty offerings.
-4-
Pembridge Value Opportunity Fund LP hopes to win seats on the company's board of
directors. With less than $25 million in assets and roughly a 1% stake in Topps
Co., Pembridge President Timothy E. Brog has nominated himself and two others
for election at the Topps shareholder meeting in July.
Another 12 hedge funds have purchased Topps shares also in recent months,
creating a dramatic shift in the shareholder base, Mr. Brog said.
At issue is whether or not the Topps should sell off its struggling candy
business, which in past year has had flat to negative earnings growth. Mr.
Pembridge had been congratulating himself on forcing change at the company last
fall after the Topps hired Lehman Brothers to help evaluate whether the
confectionary business should be sold.
Topps said this month that it had reduced its overhead and recruited several
senior-level executives to help implement growth initiatives and that the board
had confidence the company's growth strategy.
"In Confectionary, we began focusing on expanding our age demographic,
developing new product formats, and employing a more systematic approach to new
product development," said Topps Chairman and Chief Executive Arthur T. Shorin
in a statement in early April. The firm expanded its Baby Bottle Pop family
overseas and has begun shipping 2DMax and Double Dunk candies.
On April 26, Mr. Brog announced his hedge fund's nomination of himself, John J.
Jones and Eric Newman to the Topps board of directors. Messrs. Jones and Newman
are attorneys who are not affiliated with the hedge fund industry, but are both
qualified to help turn around the company, according to Mr. Brog.
Pembridge also proposes two amendments to Topps' bylaws. One would permit
stockholders to remove directors and the other would let shareholders with more
than 15% of outstanding common stock to call a special meeting of stockholders.
The Pembridge pitch to shareholders is basically calling for a change in the
management team that has been unable "to stem chronic declining revenue and
earnings."
Mr. Brog has fond childhood memories of Topps' products, but now as the firm
starts to launch "retro" entertainment items such as Wacky Packages he remains
doubtful about the company's future profitability as it hangs on to the
confectionary business.
"This is an American icon with the Bazooka gum and trading cards. These guys are
running it into the ground," Mr. Brog said.
Topps management said in a press release today [April 28] that it is reviewing
Pembridge's proxy notification and will respond to it after appropriate
consideration.
Item 3: On April 28, 2006, the following news story was published by
NewYorkBusiness.com:
-5-
TOPPS BACKS BOARD AMID PROXY CHALLENGE
by DAVID JONES
April 28, 2006
Topps Co. backed its embattled management and board of directors on Friday, two
days after a dissident shareholder threatened a new proxy challenge.
Topps Co. backed its embattled management and board of directors on Friday, two
days after a dissident shareholder threatened a new proxy challenge with his own
slate of candidates.
Topps said it will issue a response to Pembridge Value Opportunity Fund, which
plans to nominate three board members and wants to place the struggling
bubblegum and trading card maker up for sale unless things turn around quickly.
"Topps' board is comprised of seasoned industry leaders who have engaged in
building shareholder value and positioning Topps for profitable growth," said
the company in a statement. "The board has confidence in the company's growth
strategy and in Topps' prospects for the future, as well as management's ability
to execute on that strategy."
Pembridge President Timothy Brog told NewYorkBusiness.com earlier this week that
after six years in office, the current Topps leadership has failed to turn
things around.
He said the company is sitting on millions in cash, has an aging workforce and
has failed to cut expenses. "There's no pizzazz left in the company," Mr. Brog
said.
Pembridge has nominated Mr. Brog, John Jones, former senior vice president and
general counsel of Elton, Ill.-based Argosy Gaming and Eric Newman, president of
Hoopeston Foods, in Bloomington, Minn.
Topps urged shareholders to look out for a new proxy statement it planned to
file with the Securities and Exchange Commission related to the election of
board members.
Separately, Topps said it terminated an agreement with Hershey Co. to be the
exclusive supplier of Bazooka bubblegum after eight years, according to an SEC
filing. Topps, which will pay Hershey about $114,800 to end the deal, did not
disclose the name of Hershey's replacement.
Item 4: On April 28, 2006, the following news story was published by
TheDeal.com:
TOPPS AGAIN UNDER FIRE
by David Shabelman Posted 11:42 EST, 28, Apr 2006
Bubble-gum maker Topps Co. may be shoved back onto the auction block.
Company shareholder Pembridge Capital Management LLC, a hedge fund, is again
staging a proxy contest and urging the New York-based trading card and candy
manufacturer to find a buyer.
-6-
Pembridge had pushed last year for a sale of the venerable Topps, which
comprises one unit that produces sports and entertainment trading cards and
another that specializes in candy and gum.
Topps hired Lehman Brothers Inc. in February 2005 and spoke of selling its
confectionary business, which in its last fiscal year accounted for nearly half
the company's $293.8 million in revenue. But seven months later it said it
couldn't find a buyer willing to meet its price. In the end it said it would
streamline its management to cut costs.
Pembridge said last week it is nominating three candidates to Topps' nine-member
board. Portfolio manager Timothy Brog said that, if elected, he would push
company executives for a review of options, including arranging a sale, issuing
a dividend or repurchasing stock.
"Shareholders were very disappointed when Topps failed to sell their
confectionary business last year, and the operating performance of the company
has not only failed to improve, but has gotten worse," Brog said.
"A full and thorough review of all strategic alternatives, including the sale of
the company, must be explored. In addition, the cost structure of Topps must be
immediately addressed by a proactive board of directors," he said.
Item 5: On April 26, 2006, the following news story was issued by
Reuters:
BAZOOKA BUBBLEGUM-MAKER FACING HEDGE-FUND PROXY FIGHT
Wed Apr 26, 2006 10:35 AM ET
NEW YORK, April 26 (Reuters) - Topps Co. Inc. [TOPP.O], the maker of Bazooka
bubble gum and baseball cards, is facing a second proxy battle by dissident
shareholder Pembridge Capital Management LLC, the hedge fund disclosed on
Wednesday.
Pembridge, a New York-based fund that holds about 1 percent of Topps stock,
disparaged Topps management for "extremely poor operating performance, declining
stock price, an inexcusable misuse of its balance sheet" and other misdeeds. It
is running a slate of candidates for the Topps board for the second time in a
year.
Pembridge ended a similar proxy battle last June after the company agreed to
retain Lehman Brothers [LEH.N] to explore strategic options, including a
possible sale of its candy division.
But Topps said in September that it could not find a buyer that would pay what
it thought the unit was worth. Instead, it said it would cut jobs to save $2.5
million a year.
"I believe it was a half-hearted effort," said Pembridge president Timothy Brog
in an interview, referring to Topps asset sale exploration.
A representative for Topps did not return a call for comment.
Pembridge said it hired proxy solicitation firm D. F. King & Co. to solicit
shareholder votes for the dissident slate, which includes Brog, John Jones and
Eric Newman.
-7-
Pembridge, which does not disclose its assets under management, is also looking
to enact provisions that will allow all Topps directors to be up for shareholder
vote each year and allow stockholders owning 15 percent or more of its stock to
call for a special stockholders meeting.
Topps shares were trading up 13 cents to $8.60 in early trading on Nasdaq on
Wednesday. They have fallen from an all-time high of nearly $11 a share in June,
2005.
Item 6: On April 25, 2006, the following news story was published by
TheDeal.com:
HEDGE FUND POPS TOPPS
by David Shabelman Posted 06:16 EST, 25, Apr 2006
Topps Co. faces another shareholder revolt led by Pembridge Capital Management
LLC.
After dropping plans last year to gain representation on Topps' board of
directors, the hedge fund is again staging a proxy contest and urging the New
York-based trading card and candy manufacturer to find a buyer. The investment
firm is nominating three candidates to the nine-member board. Pembridge
portfolio manager Timothy Brog said that, if elected, he would push Topps
executives to consider strategic alternatives, including arranging a sale,
issuing a dividend or repurchasing stock.
"Shareholders were very disappointed when Topps failed to sell their
confectionary business last year, and the operating performance of the company
has not only failed to improve, but has gotten worse," Brog said. "A full and
thorough review of all strategic alternatives, including the sale of the
company, must be explored. In addition, the cost structure of Topps must be
immediately addressed by a proactive board of directors."
Topps hired Lehman Brothers Inc. of New York in February 2005 to shop the
confections business, which in its last fiscal year accounted for nearly half
the company's $293.8 million in revenue. But in September, Topps said that it
had failed to find a buyer willing to meet its price. At the time, Brog said he
was disappointed in the decision and said it showed the "incompetence of
management."
Pembridge, which owns roughly 1% of Topps' equity, could still choose to drop
the proxy fight. The firm launched a proxy challenge against Topps last May, but
it withdrew its board nominations a month later after reaching an agreement with
the company. Topps' largest investors as of Dec. 31 are Merrill Lynch Investment
Managers LP, with 8% of the stock; Royce & Associates LLC, with 7.5%; and Gamco
Investors Inc., with 5.7%. Topps CEO Arthur Shorin owns 5.8% of the shares.
The pact stipulated that Topps would refrain from adopting a poison-pill
takeover defense measure without shareholder approval before June 30, 2006,
while Brog agreed not to stage another proxy contest before Dec. 31, 2005.
Along with board representation, Brog seeks to eliminate Topps' staggered board,
a change that would require all directors to stand for election annually, and to
allow investors who own at least 15% of the company's outstanding common stock
-8-
to call a special meeting of shareholders. Topps has yet to set a date for its
shareholder meeting.
Topps has two major businesses: entertainment, which consists largely of selling
trading cards covering sports and other entertainment-related activities; and
confections, including sales of lollipops and Bazooka Joe bubble gum.
After enjoying strong revenue growth related to the Pokemon craze in 2000 and
2001, Topps' revenue and profit have declined steadily. For its fiscal 2006,
which ended Feb. 25, the company reported net income of $1.2 million on revenues
of $293.8 million, compared with net income of $10.9 million on sales of $294.2
million for the prior fiscal year. In fiscal 2000 its revenues were $439
million.
When Topps ended the effort to sell its confections unit last fall, the company
said it had completed a strategic review aimed at improving its operating
performance. As part of that initiative, Topps said the confections and
entertainment businesses would operate independently and that it would eliminate
some management positions with a goal of saving $2.5 million annually.
CERTAIN INFORMATION CONCERNING THE PARTICIPANTS
The Topps Full Value Committee filed with the Securities and Exchange
Commission ("SEC") on May 17, 2006 a preliminary proxy statement and
accompanying GOLD proxy card to be used to solicit votes for the election of its
slate of director nominees and certain business proposals for use at the 2006
Annual Meeting. The Committee strongly advises all Topps stockholders to read
the proxy statements and other proxy materials as they become available because
they contain important information.
STOCKHOLDERS WILL BE ABLE TO OBTAIN FREE COPIES OF THE PROXY STATEMENT FILED
WITH THE SEC BY THE TOPPS FULL VALUE COMMITTEE THROUGH THE WEBSITE MAINTAINED BY
THE SEC AT WWW.SEC.GOV. IN ADDITION, INVESTORS WILL BE ABLE TO OBTAIN FREE
COPIES OF THE PROXY STATEMENT FROM THE TOPPS FULL VALUE COMMITTEE BY CONTACTING
TIMOTHY BROG, PEMBRIDGE CAPITAL, 708 THIRD AVENUE, NEW YORK, NY 10017 OR BY
CALLING D.F. KING & CO., INC. AT (800) 628-8532.
THE PARTICIPANTS IN THE PROXY SOLICITATION ARE PEMBRIDGE VALUE OPPORTUNITY FUND
LP, A DELAWARE LIMITED PARTNERSHIP, PEMBRIDGE CAPITAL MANAGEMENT LLC, A DELAWARE
LIMITED LIABILITY COMPANY, TIMOTHY E. BROG, CRESCENDO PARTNERS II, L.P., SERIES
Y, A DELAWARE LIMITED PARTNERSHIP, CRESCENDO INVESTMENTS II, LLC, A DELAWARE
LIMITED LIABILITY COMPANY, CRESCENDO ADVISORS LLC, A DELAWARE LIMITED LIABILITY
COMPANY, ERIC ROSENFELD, ARNAUD AJDLER AND JOHN J. JONES.
INFORMATION CONCERNING THE PARTICIPANTS AND THEIR INTERESTS IN THE SOLICITATION
IS SET FORTH IN THE PROXY STATEMENT FILED WITH THE SEC.
-9-