Value Investing News - TOPP - Comments

Great work Geoff. Why do

Nick — Fri, 16 Mar 2007 10:39:19 -0400

Great work Geoff. Why do you have such interest in this particular situation? Do you have a position in TOPP?

I'm glad it snowballed. I

Nick — Thu, 15 Mar 2007 16:29:20 -0400

I'm glad it snowballed. I enjoyed reading your blog post. It is an interesting situation.

No Stake in Topps

Geoff — Thu, 15 Mar 2007 15:58:42 -0400

No – no position in Topps. It's just the kind of company I like to follow and so I decided to write the original post announcing the deal. But, then, as I was writing the post, news broke about the opposition to the deal, the letter was made public, etc. So, I said I would look into the situation and write some more about it. In the meantime, I got a lot of emails from Topps shareholders and some other bloggers started writing about the situation. It just snowballed. The length of the post grew and grew as I looked at the financials, listened to the conference call, etc. and tried to put my thoughts into words.

Got One Response Already

Geoff — Tue, 06 Mar 2007 16:09:28 -0500

As I said above, I'd be interested in hearing from owners of Topps stock and whether they're for or against the deal (as well as if they'd hold their shares and vote against if against). I left the same note on my blog as well.

I received a response already! He said he'd be voting "no". I also noticed that Seeking Alpha picked up my post and ran it with the headline:

"Is Michael Eisner 'Stealing' Topps?"

If the deal gets publicity along those lines – The name Michael Eisner and the image of Topps cards – I think it might get more negative publicity than most deals this size (which usually don't get any attention at all).

"The fact that an

Nick — Tue, 06 Mar 2007 13:51:13 -0500

"The fact that an underperforming business like this carries that much cash and that all it is good for is making a deal more attractive to private equity – honestly, that saddens me. Sometimes, I think managers of public companies could learn something from private equity. Why can't you deal with the fixer upper yourself?"

You asked a great question. I have to wonder if it has more to do with incentives (either the lack of or ineffective incentives) than the management's abilities. Obviously the incentives for Private Equity are clear.

It's Tough to Say

Geoff — Tue, 06 Mar 2007 13:33:33 -0500

It's always tough to say in these situations. But, I was just browsing the list of major institutional owners of Topps stock and – well, it's quite a list. It's a value list. It's not an activist list per se, but it might not be a list you can count on to kiss the CEO's pinky ring.

I have to look things over some more, but this was a company I often followed just because I thought the product should make for great profitability / free cash flow. In this way, it's like Tootsie Roll (TR) another company I check in with just because of what it sells.

But, that's where the similarities end. Tootsie Roll has been beautifully managed – I don't think you can say the same about Topps.

I think there's a real danger of some momentum building up against this deal. Eisner's name won't help. This might actually even make it into the mainstream media, if those opposed don't back down.

Anyway, I don't own shares. And I'm interested in hearing from people who do. If anyone at Value Investing News owns shares of Topps, please send me an email with your thoughts – or comment to my blog, or comment right here. I'd like to know how actual owners feel about this one.

Personally, I can't hide the fact that this is not the kind of deal I like to see. These deals make me feel like private equity steps in where managers fears to tread. This is a public company, it has cash on its balance sheet. Do something about it. If your stock is extremely undervalued do a huge tender – if your stock isn't overvalued, pay out a special dividend. The fact that an underperforming business like this carries that much cash and that all it is good for is making a deal more attractive to private equity – honestly, that saddens me. Sometimes, I think managers of public companies could learn something from private equity. Why can't you deal with the fixer upper yourself?

Do you think Ajdler will be

Nick — Tue, 06 Mar 2007 13:10:04 -0500

Do you think Ajdler will be able to overcome the 7-3 vote in favor of deal?

Talk about inefficient management!

Nick — Tue, 06 Mar 2007 12:31:56 -0500

This is from the linked article: "I have to look over the company's financials tonight, but it looks like the market cap overstates the actual cash cost of purchasing Topps by 25-33% or thereabouts. In other words, it seems an acquirer would be getting "cash back" of about twenty to twenty-five cents per dollar spent buying the company."

I'm very interested in what you find when you look more closely at their financials.