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
/X/ Definitive Additional Materials
/_/ Soliciting Material Under Rule 14a-12
THE TOPPS COMPANY, INC.
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(Name of Registrant as Specified in Its Charter)
CRESCENDO ADVISORS LLC
CRESCENDO PARTNERS II L.P., SERIES Y
CRESCENDO PARTNERS III, L.P.
CRESCENDO INVESTMENTS III, LLC
CRESCENDO INVESTMENTS II, LLC
ERIC S. ROSENFELD
ARNAUD AJDLER
THE COMMITTEE TO ENHANCE TOPPS
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/X/ No fee required.
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0-11.
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which
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or the form or schedule and the date of its filing.
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(4) Date Filed
Crescendo Partners II, L.P., Series Y has filed a definitive proxy
statement with the SEC in connection with the solicitation of proxies against a
proposed merger between The Topps Company, Inc. ("Topps") and a buyout group
that includes Madison Dearborn Partners, LLC and an investment firm controlled
by Michael Eisner, which will be voted on at a special meeting of the Company's
stockholders.
Item 1: On August 27, 2007, The Committee to Enhance Topps sent the
following letter to shareholders:
AN IMPORTANT MESSAGE TO THE TOPPS COMPANY, INC. STOCKHOLDERS
FROM THE COMMITTEE TO ENHANCE TOPPS
The $9.75 Eisner offer is inadequate and is the result of a flawed process.
VOTE THE GOLD PROXY CARD TODAY AGAINST THE ILL-ADVISED EISNER MERGER!
August 27, 2007
Dear Fellow Topps Stockholder:
The $9.75 Eisner deal is highly inadequate and ill-advised. A realistic review
of the Company's recent improved performance and a change in management will
yield much greater value to stockholders as illustrated by the following:
DISCOUNTED CASH FLOW (DCF) ANALYSIS
Based on the January 25, 2007 presentation from Lehman(1), Lehman's DCF value of
Topps is between $10.64 and $12.99 using the management case. The DCF analysis
is very appropriate here because of the lack of good comparables and the
projected margin improvements of Topps which are starting to be realized.
Regarding the management case versus the adjusted case, it is important to point
out that the management case was prepared in the context of the Company's
three-year plan and were the numbers used at the January 9, 2007 Board meeting.
The adjusted case "magically" appeared for the first time at the January 25
board meeting, only after the $9.75 bid was discussed. Ask yourself if the
adjusted case would have been prepared by management if management were not
trying to push the Eisner Merger on stockholders? Furthermore, the budget for
2008 assumes EBITDA in line with the management case further raising the
question as to the validity of the adjusted case. INCREDIBLY, TOPPS DID NOT
INCLUDE THE RESULTS OF THE DCF VALUATION ANALYSIS IN ITS PRESENTATIONS TO
INVESTORS FILED ON JUNE 15, 2007 AND AUGUST 16, 2007! ASK YOURSELF WHAT
MANAGEMENT WAS TRYING TO HIDE FROM ITS STOCKHOLDERS?
TRUE VALUE
The three analysts covering Topps (C.L. King, Morgan Joseph and Wedbush Morgan)
have current target prices between $11 and $12 per share. These analysts do not
take into account the positive impact of replacing management, improving margins
and re-leveraging the Company's balance sheet (to 1.5 times 2008 EBITDA).
Accordingly, we believe that the Company's shares could be worth conservatively
between $16 and $18(2) in two years without considering the potential of a
change of control premium.
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(1) Based on the comments from Judge Strine's opinion, we believe that the
January 25 valuation is more appropriate than the valuation from the fairness
opinion.
(2) This price assumes a forward-looking EV/EBITDA multiple in the 9.0x to 10.0x
range to the projected 2010 EBITDA, a repurchase of $110 million of shares at a
price of $10.25 and the use of free cash flows to pay down debt.
We are not the only ones who believe that there is significant intrinsic value
to be unlocked in Topps. Sean P. McGowan, an analyst at Wedbush Morgan
Securities who Forbes recently ranked #1 in the Leisure Equipment & Products
industry in its 2007 Best Analysts-Earnings Estimators survey, stated the
following in a Research Note dated June 19, 2007 regarding a scenario in which
the Committee's director nominees are elected to the Topps Board:
"We believe that this scenario might actually have been the one that could
realize the most value over time, because we believe the company's
fortunes continue to improve and that better management could, over a
period of 18-24 months, have produced value well in excess of $15 per
share."
In his report issued on January 17, 2007, Mr. McGowan from Wedbush Morgan
estimates that 2008 EBITDA will be $30 million and 2009 EBITDA will be $40
million (similar to the management case). Here are some noteworthy quotes from
the report:
Regarding the stock undervaluation:
"WE BELIEVE THAT SIGNIFICANT IMPROVEMENTS IN TOPPS' OPERATIONS HAVE BEEN MASKED
BY ONE-TIME EVENTS AND OTHER FACTORS. THE IMPROVEMENTS INCLUDE A NEW AND MORE
FAVORABLE LICENSE FROM MAJOR SPORTS LEAGUES, MANAGEMENT CHANGES AS WELL AS NEW
PRODUCT INTRODUCTIONS IN CANDY, AND SIGNIFICANT COST REDUCTIONS THROUGHOUT THE
COMPANY. WE BELIEVE THESE IMPROVEMENTS WILL BECOME MORE EVIDENT OVER THE COURSE
OF THE NEXT 18 MONTHS."
Regarding the potential for future growth:
"RECENT RESTRUCTURING LEAVES THE COMPANY BETTER-POSITIONED FOR PROFITABLE
GROWTH. WE BELIEVE THAT BY SPLITTING THE COMPANY INTO TWO BUSINESS SEGMENTS AND
ALLOCATING MORE OF ITS OVERHEAD DIRECTLY TO THE BUSINESS SEGMENTS, MANAGEMENT
HAS GREATER ACCOUNTABILITY AND MORE TOOLS FOR PROFITABLY GROWING SALES."
Regarding the confectionary business (which Topps is now using to try to scare
investors into accepting the $9.75 bid):
"THESIS: TOPPS' CANDY AND GUM BUSINESSES HAVE REACHED A PLATEAU IN RECENT YEARS
AFTER RAPID GROWTH IN THE LATE 1990S/EARLY 2000S. THE COMPANY HAS TAKEN SWEEPING
STEPS TO REINVIGORATE THE BUSINESS, AND WE BELIEVE THE FRUITS OF THESE EFFORTS
ARE NOT YET REFLECTED IN THE COMPANY'S RESULTS."
COMPARABLE COMPANY ANALYSIS
Topps has two different divisions: confectionary and entertainment. The median
EV/2008 EBITDA for the confectionary comps(3) is 12.1. There are no good comps
for the entertainment division beyond Upper Deck which is a private company. The
entertainment division is a trophy property in a duopoly business. The division
is a growing, high margin, high return on capital and low capex business. These
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(3) Confectionary comps include Tootsie Roll, Wrigley, Hershey's and Cadbury
Schweppes
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financial characteristics are worth a high multiple. We believe that Topps stock
should not trade in the market for less than 11 times 2008 EBITDA which would
yield a stock price around $10.40 per share(4).
This valuation does not take into account:
o any change of control/deal premium (usually 20 to 30%)
o the potential to improve Topps' margins beyond 2008 (Topps' margins are
depressed compared to comps, its own historical results and its potential)
o the potential to upgrade management
o the potential benefits of optimizing Topps' balance sheet by re-leveraging
the balance sheet to 1.5 times 2008 EBITDA through a Dutch tender offer
o the optionality of a future hit on the entertainment side of the business
Therefore, it should be apparent why we believe that $9.75 per share is highly
inadequate and why Topps stock could be worth conservatively between $16 to $18
per share in two years.
PREMIUM ANALYSIS
The $9.75 price represents a 3% premium to the average closing price for the 20
trading days preceding the announcement of the merger. Lehman's argument that
shareholders should analyze the premium based on an average price prior to the
July 28, 2006 annual meeting (more than 9 months prior to the announcement of
the merger agreement) because supposedly takeover speculation was the cause for
the rise in the stock price between the annual meeting and the announcement of
the merger agreement is flawed for the following reasons:
o The rise in the stock price had to do with the Topps improved operations
and the prospect of a large return of cash. For example, during the fiscal
2007 third quarter conference call (January 2007), the CFO said that Topps
would hit the upper end of the guidance and may even exceed it. The CFO
also said that the Company had stopped its share buyback and was
considering its use of cash. Topps' stock increased approximately 8%
following the release of the Company's third quarter results.
o The last time that there was real takeover speculation in June 2005 (after
the Company announced it was exploring the sale of the confectionary
division), the stock price reached $10.94. At that time, the Company's
entertainment business was faring much worse than it is today. So, if
there was takeover speculation during the period between the July 28, 2006
annual meeting and the announcement of a deal, one would have expected the
stock to rise above $10.94.
o Arthur Shorin made numerous comments indicating that Topps was not for
sale(5).
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(4) Assumes 2008 EBITDA of $29.4 million and $81.5 million of excess cash
(5) For example, on July 24, 2006, Mr. Shorin sent a letter to shareholder
including the following statement: "We are committed to completing the
turnaround of the Company by following through on our strategic plan. We are
convinced that attempting a "quick fix" sale of the Company AT THIS TIME will
lead to a poor result -- inadequate offers, a harmful waste of time and a
disrupted Topps organization -- when a focus on operations is needed most." We
note that this statement was disingenuous and misleading since that same day,
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In conclusion, the $9.75 price is highly inadequate. Given the standalone value
of Topps, there is little downside for shareholders to reject the $9.75. Why
give up control of our company and forgo the potential upside from
value-enhancing steps? There are significant opportunities to improve the
business which will lead to an increased valuation for all the stockholders.
PROTECT YOUR INVESTMENT TODAY BY VOTING AGAINST
THE ILL-ADVISED EISNER MERGER!
VOTE THE GOLD PROXY CARD TODAY!
If you have any questions, please feel to call us directly at (212) 319-7676.
You may also call D.F. King & Co., Inc., which is assisting the Committee,
toll-free at (800) 628-8532.
Sincerely yours,
/s/ Eric Rosenfeld & Arnaud Ajdler
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Eric Rosenfeld & Arnaud Ajdler
The Committee to Enhance Topps
CERTAIN INFORMATION CONCERNING THE PARTICIPANTS
The Committee to Enhance Topps (the "Committee"), together with the other
participants named below, has made a definitive filing with the Securities and
Exchange Commission ("SEC") of a proxy statement, a proxy supplement and an
accompanying proxy card to be used to solicit votes in connection with the
solicitation of proxies against a proposed merger between The Topps Company,
Inc. (the "Company") and a buyout group that includes Madison Dearborn Partners,
LLC, and an investment firm controlled by Michael Eisner, which will be voted on
at a meeting of the Company's stockholders (the "Merger Proxy Solicitation").
Crescendo Advisors ("Crescendo Advisors"), together with the other participants
named below, intends to make a preliminary filing with the Securities and
Exchange Commission ("SEC") of a proxy statement and an accompanying proxy card
to be used to solicit votes for the election of its nominees at the 2007 annual
meeting of stockholders of Topps (the "Annual Meeting Proxy Solicitation").
THE COMMITTEE AND CRESCENDO ADVISORS ADVISE ALL STOCKHOLDERS OF THE COMPANY TO
READ THE PROXY STATEMENT, AND OTHER PROXY MATERIALS, INCLUDING PROXY
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Mr. Shorin signed a confidentiality agreement with the Tornante Company in
connection with the proposed buyout.
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SUPPLEMENTS, IN CONNECTION WITH EACH OF THE MERGER PROXY SOLICITATION AND THE
ANNUAL MEETING PROXY SOLICITATION AS THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION. SUCH PROXY MATERIALS WILL BE AVAILABLE AT NO
CHARGE ON THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV. IN ADDITION, THE
PARTICIPANTS IN THE PROXY SOLICITATIONS WILL PROVIDE COPIES OF THE PROXY
STATEMENT WITHOUT CHARGE UPON REQUEST. REQUESTS FOR COPIES SHOULD BE DIRECTED TO
THE PARTICIPANTS' PROXY SOLICITOR, D.F. KING & CO., INC. AT ITS TOLL-FREE
NUMBER: (800) 628-8532.
The participants in the Merger Proxy Solicitation are Crescendo Advisors LLC, a
Delaware limited liability company ("Crescendo Advisors"), Crescendo Partners
II, L.P., Series Y, a Delaware limited partnership ("Crescendo Partners II"),
Crescendo Investments II, LLC, a Delaware limited liability company ("Crescendo
Investments II"), Crescendo Partners III, L.P., a Delaware limited partnership
("Crescendo Partners III"), Crescendo Investments III, LLC, a Delaware limited
liability company ("Crescendo Investments III"), Eric Rosenfeld, Arnaud Ajdler
and The Committee to Enhance Topps (the "Merger Proxy Solicitation
Participants").
The participants in the Annual Meeting Proxy Solicitation include the Merger
Proxy Solicitation Participants, together with Timothy E. Brog, John J. Jones,
Michael Appel, Jeffrey D. Dunn, Charles C. Huggins, Thomas E. Hyland, Thomas B.
McGrath and Michael R. Rowe (the "Annual Meeting Proxy Solicitation
Participants"). Together, the Merger Proxy Solicitation Participants and the
Annual Meeting Proxy Solicitation Participants are referred to herein as the
"Participants."
Crescendo Advisors beneficially owns 100 shares of common stock of the Company.
Crescendo Partners II beneficially owns 2,568,200 shares of common stock of the
Company. As the general partner of Crescendo Partners II, Crescendo Investments
II may be deemed to beneficially own the 2,568,200 shares of the Company
beneficially owned by Crescendo Partners II. Crescendo Partners III beneficially
owns 126,500 shares of common stock of the Company. As the general partner of
Crescendo Partners III, Crescendo Investments III may be deemed to beneficially
own the 126,500 shares of the Company beneficially owned by Crescendo Partners
III. Eric Rosenfeld may be deemed to beneficially own 2,694,900 shares of the
Company, consisting of 100 shares held by Eric Rosenfeld and Lisa Rosenfeld
JTWROS, 2,547,700 shares Mr. Rosenfeld may be deemed to beneficially own by
virtue of his position as managing member of Crescendo Investments II, 126,500
shares Mr. Rosenfeld may be deemed to beneficially own by virtue of his position
as managing member of Crescendo Investments III and 100 shares Mr. Rosenfeld may
be deemed to beneficially own by virtue of his position as managing member of
Crescendo Advisors. Mr. Ajdler beneficially owns 2,301 shares of the Company.
Timothy E. Brog beneficially owns 133,425 shares of common stock of the Company,
John J. Jones beneficially owns 2,301 shares of common stock of the Company, and
none of Michael Appel, Jeffrey D. Dunn, Charles C. Huggins, Thomas E. Hyland,
Thomas B. McGrath and Michael R. Rowe beneficially own any shares of common
stock of the Company.
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SOURCE The Committee to Enhance Topps
Contact: D.F. King & Co., Inc., +1-800-628-8532
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