Saturday, March 30, 2024

The End Of Topps (Not-So-Slight Return)

Well, the inevitable happened the other day as Michael Eisner's Tornante Company and his partners, Madison Dearborn, sold off the last remaining bit of Topps Chewing Gum, or more properly these days, The Topps Company. It wasn't really the end of the company founded as a partnership by the Shorin Family in 1938, which to my mind occurred when Eisner's group and Madison Dearborn bought out, quite acrimoniously it seems, the remaining Shorin's (and a host of other stockholders) for $385.4 Million on March 6, 2007, bit it certainly put a final cap on the era of the founders.

That 2007 deal was nudged by an activist investor group called Pembridge Capital, which held seats on the Topps board. Despite some drama that included arch rival Upper Deck making a game attempt to swoop in, the original deal went through, ex-CEO Arthur Shorin sold his 2.7 Million shares at $9.75 a pop (for a pretty tasty haul of $22.425 Million), and Michael Eisner took over at Topps. Nice work if you can get it!

So today I thought I'd take a look at some key Topps business activity today both before and after things got Mickey-Moused.

Founded as a partnership between the four Shorin brothers (and probably their silent-partner father Morris), Topps began doing business in December of 1938 with a sole product called Topps Gum, which sold for a penny. They endured the shortages and privations of World War 2 by selling this one product and some ration and shortage induced low-sugar candy bars, then came up with all-time winner Bazooka bubble gum in the late summer of 1947, a vital catalyst for their growth. 

Introducing baseball cards of a sort in 1951 in the bizarre set dubbed Baseball Candy, which despite getting Topps royally sued and cease-and-desisted, led them to double down and come out with the now classic 1952 Baseball set, which helped build their profits and signaled the start of an as-yet uninterrupted-run of annual issues covering the game of sphere and ash. This led to a very litigious four-year period before Topps ended up purchasing their biggest rival, Bowman, in February 1956 when the parent company of that venerable Philadelphia firm (Connelly Containers) elected to pursue other, and quite lucrative, business opportunities.

Topps weathered challenges thereafter from Fleer, the Federal Trade Commission, the Major League Baseball Players Association and other, smaller antagonists before floating an IPO of 435,000 shares of common stock in March of 1972, which saw the company listed on the American Stock Exchange, initially valued at $17.50 per share, or $7,612,500. There were also apparently a gaggle of preferred voting shares that I'm still trying, somewhat listlessly, to untangle that allowed the Shorin's and their various in-laws and allies to essentially retain full control of the company. (UPDATE 4/12/24: I just found an article indicating only 25% of the company was being listed, so the valuation was $30,450,000).

I think this specimen shows how the issued stock certificates looked in 1972 as dot-matrix computer printing and boxed CUSIP numbers were in use by then but this version is from 1978 so I can't be sure:

The AMEX ticker symbol was TOPPSG. 

In 1975 Fleer sued them in an action that led to the 1981 expansion of the baseball card market and ultimately rocket-fueled the growth of of the hobby. In 1983 the Topps board agreed to a leveraged buyout by an investor group headed by Forstmann Little. This deal closed in early 1984 and 3.6 Million shares of Topps common stock were gobbled up at $26.25 per share, valuing the now-private company at roughly $94.5 Million.

In May 1987 a NASDAQ IPO saw Topps issue 1.7 Million shares (described as 31% of "itself" amusingly enough) and be rebranded as The Topps Company, Inc. The $13 stock price meant a total valuation of around $71.29 Million, which seems like a bit of a devaluation (hard to tell with this stuff, there's so many loopholes and ins-and-outs). I ended up with a share of same in 1994 thanks to an old buddy named Dale Beaumont:

This bubbled along, despite the inevitable ups-and-downs of the stock market, quite nicely overall until Mr. Eisner and Madison Dearborn came along with their $385.4 Million in 2007 and took the company private once again, with the Shorin's and friends no longer directly involved once the deal closed, although some family and insiders fulfilled (very brief) consulting roles with the new ownership group. 

Eisner though, kept the company fairly intact in spirit and fact after the purchase and then tried to sell the whole magilla for $1.3 Billion in 2021 after his plans for expansion ran up against Madison Dearborn's preference to control costs and merely ride profits forward. That deal - which seemingly turned into a disaster when Major League Baseball and the Major League Baseball Players Association decided to let their licensing with Topps expire eleven days before the close of the deal and instead go with Fanatics -  would have seen a hedge fund called Mudrick Capital take control.  Mudrick planned to merge with Topps, while Eisner planned to roll his 46 Million shares (worth $800 Million plus kids!) into the new company, which was intended to operate as a SPAC, while Madison Dearborn cashed out entirely. The stock symbol would have been: TOPP

There was a lot of boo-hooing in the press about how he got snookered and was no longer a force in the business world (and in fairness, no one at Topps seemed to catch on that MLB/MLBPA and Fanatics were in their own talks) but in the end Eisner seems like he ended up doing OK. Fanatics bought the Topps brand, assets and licenses in either very late December 2021 or very early January 2022 for $500 Million or so (the exact figure seems to be slightly less than that round number) while Eisner and Madison Dearborn held onto Bazooka Candy Brands and a gift card services unit called TDS, which stood for Topps Digital Services.  

You know those giant racks of gift cards you see at the supermarket?  TDS provide the processing backbone for them! Topps seems to have acquired that firm, originally called GMG Lifestyle Entertainment, then based in Minneapolis, sometime during the reign of Eisner (and possibly as early as 2007) but specifics are a little hard to find due to this all being in the realm of private equity. I suspect the original GMG involvement was to help Topps manage all of their redemption and loyalty programs.

Bazooka Candy Brands, despite the fading market share of its namesake bubble gum, still manufactures, among a myriad of other confections, Ring Pops, which sell gloriously year-after-sticky-fingered-year. That remnant of the business was sold to Apax Partners for a reported $700 Million in October 2023. Then early 2024 saw the sale of TDS to Ziff-Davis for a rumored $170 Million, formally ending the Eisner era at Topps.

If you are tallying all that at home, it adds up to around $1.37 Billion, essentially what the 2021 sale to Mudrick Capital was to gross. I dunno, this Eisner guy is pretty good at business after all!


GTT said...

I didn't know that much about the modern capitalist side of Topps before reading - very interesting stuff.

Bo said...

Any indication of how any of these groups affected cardmaking strategy? I wonder if certain ideas were pushed up or down by the PE firms.

John Bateman said...

A Billion

I wonder if the value of every Topps baseball card from 1952 to 1969 still in circulation exceeds A Billion dollars

toppcat said...

1) The influence from all the groups etc. would really just be on driving the stock price IMO.

2) I'll take the under on $1 Billion in card value from 1962-69. But maybe not by too much.