Eisner the Underdog?

The Topps board meets Monday to reconsider Upper Deck's takeover bid, after being accused of giving the former Disney chief a sweet deal

by Ronald Grover

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If there's one thing that Michael Eisner understands, it's a good sequel. The former chief executive of Walt Disney (DIS) finds himself the unwitting star of the second installment of his own worst nightmare—the Disney board uprising, legal challenges, and his ultimate early retirement in 2005, a year ahead of schedule. In this sequel, however, the action is at Topps (TOPP), the 70-year-old maker of baseball cards and the iconic Bazooka bubble gum.

Back in March, Eisner seemed to be on a roll. His post-Disney life as a private equity investor was picking up steam with an investment in the social-networking site Veoh and the acquisition of kids' sports merchandising company, Team Baby Entertainment. But since March, he's been on the sidelines as infighting has broken out at Topps, which he thought his Tornante Co. had purchased along with private equity investment firm Madison Dearborn Partners for $385.4 million. Since then, the Topps board has been wracked by dissension, including a nasty public letter from one dissident board member.

Meanwhile, Eisner's deal has landed in a Delaware court (where a judge lambasted Topps for, among other things, neglecting to tell shareholders that Eisner had signed deals to retain management), and Topps' sports card rival Upper Deck has filed a hostile $435 million bid to grab the company from Eisner (see BusinessWeek.com, 3/6/07, "Topps Buyout Gets Sticky for Eisner & Co.").

Eisner's Déjà Vu

As Yogi Berra once said, it's déjà vu all over again for Eisner, who suffered through his own board revolt in 2003 when Vice-Chairman Roy Disney was dumped from the Disney board and, along with a fellow board member, launched a battle against Eisner's stewardship that resulted in Eisner getting a 43% no confidence vote at the company's annual meeting.

Not too long after that episode, Disney's dirty laundry was dragged through the Delaware court, when Eisner and top Disney executives were deposed in a shareholder derivative case concerning Eisner's firing (and hefty severance payout) of then-president Michael Ovitz in 1996 after only 15 months on the job. Eisner retired from Disney in October, 2005. Eisner declined to comment for this story.

Big Topps Circus

At Topps, Eisner is more of a drive-by victim of what's fast becoming a shareholder circus. After initially resisting the overture from Upper Deck, the Topps board will announce on Monday, July 9, whether it intends to entertain Upper Deck's offer. That would likely send Eisner to the showers, according to those with knowledge of the media mogul, who say he is unlikely to increase his $9.75-per-share offer. A judge has ordered the board to postpone a planned shareholder meeting to approve Eisner's bid and to disclose to shareholders "Eisner's assurances that he would retain existing management."

In a strongly worded opinion, the judge found that the Topps board had failed to give proper consideration to Upper Deck's bid. Upper Deck, which says it first approached Topps on Feb. 20—two weeks before Eisner's deal was announced—said on June 25 that it was launching a hostile bid.

Boardroom Theatrics

Eisner knows something about boardroom infighting, and at Topps it was a beaut. Three members of the company's 10-person board rejected the Eisner deal, the company says in financial filings. One of the no voters, Arnaud Ajdler, managing director of major shareholder Crescendo Partners II, delivered a letter to shareholders in which he charged that the Eisner agreement was "flawed" in that the board failed to shop the company around.

That means that Eisner has to hitch his wagon to a board that has already been boxed around by one member, has a higher bid on the table, and has been chastised by a Delaware judge. Through a spokeswoman, Topps refused comment. But in public documents, the company says that it identified 107 potential bidders after initially accepting Eisner's bid. During a so-called go-shopping provision in its deal with Eisner, five of the companies signed confidentiality agreements to look over Topps' books and only one—a rival, presumably Upper Deck—made an offer. Topps also says in its filings that Upper Deck did not satisfy certain concerns, including how it would finance the bid, and that Topps worried that antitrust regulators would not allow two competitors to merge.

That could still be the board's concern, although Upper Deck has since detailed how it would finance the bid and has hired experts to give the antitrust concerns their O.K. But Michael Eisner, who's off this summer making online movie shorts like his wildly popular Prom Queen, no doubt simply wants an end to the boardroom theatrics. He's seen that show before. He knows how it turned out the first time around. You can't blame the guy from the Happiest Place on Earth if he's a little Grumpy, can you?

Grover is Los Angeles bureau chief for BusinessWeek.