Topps, dissident director trade barbs over merger

PHILADELPHIA, May 31 (Reuters) - Merger negotiations between bubble gum maker Topps Co. Inc. TOPP.O and rival Upper Deck Co. have been strongly criticized by a dissident Topps director.

"I have very significant concerns about the process that led to the signing of the merger agreement with entities affiliated with Michael Eisner and Madison Dearborn Partners, LLC.," board member Arnaud Ajdler said in a letter to Topps, which also makes popular baseball trading cards.

"These concerns now extend to the manner in which the current negotiations with the Upper Deck Company are being conducted."

In March, Topps agreed to be acquired by Madison Dearborn and Tornante Co., an investment firm run by Eisner, for $9.75 per share.

Ajdler immediately spoke out against the deal, saying it failed to maximize shareholder value. Ajdler said Topps did not conduct a thorough review of strategic alternatives and failed to contact rival Upper Deck to see if it had interest in acquiring the company.

But earlier this month, Upper Deck, which publishes sports trading cards and other memorabilia, made an unsolicited offer to buy Topps for $10.75 per share. Tornante and Madison Dearborn gave Topps permission to negotiate with its rival.

Topps said on Thursday it has been trying to determine whether Upper Deck could address its concerns about antitrust hurdles, financial risks and other legal impediments to completing a transaction.

"The negotiation with Upper Deck is now being overseen by a group of directors who, in my opinion, have significant conflicts of interest," Ajdler said.

Ajdler added the executive committee of the board contained members who had conflicts, such as Arthur Shorin. He said Shorin would be biased against because he would not "want to see the company that was started by his father and uncles fall into the hands of long-time rival Upper Deck."

In a letter, Topps responded by saying Ajdler's efforts were "unproductive, self-serving and contrary to maximizing stockholder value."

"Upper Deck is a significant competitor of Topps and could benefit from obtaining highly sensitive information about Topps or derailing a transaction involving Topps," Topps said. "Prudence dictates that the board approach any Upper Deck discussion carefully and thoughtfully."

Topps said it would "continue to act in the best interest of all stockholders and remain focused on maximizing stockholder value."

Activist hedge fund Crescendo Partners and its affiliates, which own about 6.6 percent of Topps, said on Wednesday it may nominate a full slate of directors for Topps' board.

Ajdler is a managing director of Crescendo Partners.

"If the ill-advised merger with Michael Eisner is rejected by stockholders at the special meeting scheduled for June 28, 2007, we will then seek to replace the entire Topps Board with our slate of nominees," said Eric Rosenfeld, a managing member of Crescendo Advisors.

Topps shares closed at $10.22, down 6 cents, on Nasdaq.