978-1285770178 Case Printout Case CPC-06-08 Part 5

Unlock access to all the studying documents.

View Full Document

too easy an out in the event that regulators raised even a minor objection

than responding to Upper Deck’s proposal by raising these legitimate

concerns, the Topps board chose to tie its hands by failing to declare

Upper Deck an Excluded Party in a situation where it would have cost

Topps nothing to do so. Eisner would have had no contractual basis to

complain about a Topps board decision to treat Upper Deck as an

Excluded Party in light of Upper Deck’s 10% higher bid price.

Upper Deck’s first bid may not have been a Superior Proposal. But Topps

have believed that their financing and antitrust concerns were manageable

ones that could and, indeed, should have been capable of reasonable

resolution in subsequent negotiating rounds. Topps could have gone back

to Upper Deck with a proposal to increase the reverse termination fee and

could have proposed a reasonable provision to deal with the antitrust

concerns. By declaring Upper Deck an Excluded Party, the Topps board

would have preserved maximum flexibility to negotiate freely with Upper

Deck. The downside of such a declaration is hard to perceive.

the Topps’s Incumbent Directors and their advisors, as revealed in this

record, does not suggest such a motivation. The decision of Brog to

abstain from the vote on that issue is an oddment, I admit, which lends

support to the decision, but is consistent with the Dissident Directors’

enigmatic behavior and possibly a refusal by Brog to vote on the issue,

this point inspires no confidence that their prior actions were motivated by

a desire to advance the interests of Topps stockholders.

Eisner’s bid; there was no financial contingency, but Topps’s remedy was

provision offering to divest key licenses if required by antitrust regulators,

as well as an opinion by a respected antitrust expert addressing Topps’s

still unspecified antitrust concerns.

Although the Topps Incumbent Directors did obtain a waiver from Eisner to

enter discussions with Upper Deck about this bid, they did not pursue the

because of the optics of the transaction.

That said, Upper Deck was offering a substantially higher price, and rather

directors seeking to get the best value for stockholders. Topps made no

reasonable counter-offer on the antitrust issue and failed to identify why

the transaction proposed a genuine antitrust concern. Instead, Topps

insisted that Upper Deck agree to accept any condition, however extreme,

proposed by antitrust regulators, and Topps never acknowledged its own

very limited remedial recourse if he breached, largely one senses, because

of the reputational damage Eisner would suffer if he failed to close, the

Topps board never seems to have taken into account the reputational

damage Upper Deck would suffer if it did the same, despite its knowledge

that Upper Deck has acquired other businesses in the past (remember

Silverstein are not skilled, competent, hard-working executives. More

important, it is often the case that founders (and sons of founders) believe

that their businesses stand for something more than their stock price.

Founders therefore often care how their family legacy-in the form of a

corporate culture that treats workers and consumers well, or a commitment

a single large-scale business organization. They derive their identity in part

from that organization and feel that they contribute to the identity of the

firm. The mission of the firm is not seen by those involved with it as wholly

economic, nor the continued existence of its distinctive identity as a matter

of indifference.”), aff’d, 571 A.2d 1140 (Del.1989).

Although Shorin and the other defendants claim that they truly desire to get

the highest value and want nothing more than to get a topping bid from

Upper Deck that they can accept, their behavior belies those protestations.

In reaching that conclusion, I rely not only on the defendants’ apparent

failure to undertake diligent good faith efforts at bargaining with Upper

whose interests are not aligned with the corporation, to establish rules of

the game that promote an orderly auction, and to give the corporation

leverage to extract concessions from the parties who seek to make a

bid.FN28

FN28. Contemplate, for example, a final round auction involving three

But standstills are also subject to abuse. Parties like Eisner often, as was

done here, insist on a standstill as a deal protection. Furthermore, a

standstill can be used by a target improperly to favor one bidder over

another, not for reasons consistent with stockholder interest, but because

managers prefer one bidder for their own motives.

Upper Deck has shown a reasonable probability of success on its claim

that the Topps board is misusing the Standstill. As I have indicated, I

cannot read the record as indicating that the Topps board is using the

Standstill to extract reasonable concessions from Upper Deck in order to

unlock higher value. The Topps board’s negotiating posture and factual

chance to accept a potentially more attractive higher priced deal, it keeps

them in the dark about Upper Deck’s version of important events, and it

keeps Upper Deck from obtaining antitrust clearance, because it cannot

begin the process without either a signed merger agreement or a formal

tender offer.

conditional. Indeed, Upper Deck is not even asking for some sort of prior

restraint preventing the Topps board from implementing a rights plan in the

event of a tender offer (although Upper Deck has indicated that will begin

round two of this litigation if Topps does). What Upper Deck is asking for is

release from the prior restraint on it, a prior restraint that prevents Topps’s

FN29. E.g., MacAndrews & Forbes Holdings, Inc. v. Revlon, Inc., 501 A.2d

1239, 1251 (Del.Ch.1985), aff’d, 506 A.2d 173 (Del.1986).

Similarly, Topps went public with statements disparaging Upper Deck’s bid

and its seriousness but continues to use the Standstill to prevent Upper

Deck from telling its own side of the story. The Topps board seeks to have

System v. Crawford, 918 A.2d 1172, 1192 (Del.Ch.2007) (“Shareholders

would suffer irreparable harm [if they] were … forced to vote without

knowledge of … material facts.”); ODS Technologies, L.P. v. Marshall, 832

A.2d 1254, 1262 (Del.Ch.2003) (“The threat of an uninformed stockholder

vote constitutes irreparable harm.”); Pure Resources, 808 A.2d at 452

suggests no genuine desire by the board to use the Standstill for that

purpose, that danger is minimal. To address it, however, the injunction I

will issue will not allow Upper Deck to go backwards as it were. The

Merger vote will be enjoined until after Topps has granted Upper Deck a

waiver of the Standstill to: (1) make an all shares, non-coercive tender

Deck any relief from its obligations not to misuse Topps’s confidential

information.

In reaching a remedy, I also take into account unsolicited correspondence I

received from the defendants today at a time when this decision was being

finalized for imminent issuance. That correspondence suggests that the

the record as it existed as of mid-day, I conclude that an injunction of the

kind I have outlined above remains in order. By its terms, that injunction

will not prevent Topps from keeping the Standstill in place but if it chooses

to do so, it will not be able to proceed with the Merger vote.

The other danger of an injunction of this kind is premised on a fear that

Upper Deck’s higher-priced deal, taking into account its unique risks, over

Eisner’s lower-priced deal, which has its own risks.FN31 If the Topps

board sees the Upper Deck tender offer and believes it should not be

accepted, it can tell the stockholders why. It can even consider the use of a

rights plan to prevent the tender offer’s procession, if it can square use of

similar offers, or dissolution of the company becomes inevitable, the

directors cannot fulfill their enhanced Unocal duties by playing favorites

with the contending factions. Market forces must be allowed to operate

freely to bring the target’s shareholders the best price available for their

equity.”); see also Robert M. Bass Group, Inc. v. Evans, 552 A.2d 1227,

For all these reasons, the moving parties’ motion for a preliminary

injunction is GRANTED. The parties shall present an implementing order

no later than noon on June 18, 2007.