Canada: The Topps Decision – Another Take On Standstills

Last Updated: September 4 2007

Article by Michael Gans, Mark Adkins and Cassandra Brown (Student-at-Law), © 2007, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Mergers and Acquisitions, July 2007

On June 14, 2007, the Delaware Court of Chancery enjoined a shareholders meeting of the Topps Company, Inc. (Topps), at which a vote was to have taken place on its acquisition by private equity co-sponsors Madison Dearborn Partners LLP and an entity controlled by former Disney CEO Michael Eisner (together, the Eisner Group). The meeting was enjoined until (i) potential rival bidder the Upper Deck Company (Upper Deck) was released from its standstill agreement to permit it to publicly comment on the seriousness of its negotiations with Topps and to make a tender offer to shareholders and (ii) Topps made corrective disclosure regarding both the Eisner Group’s plan to retain current management and a valuation of the company by Lehman Brothers. The decision serves as an interesting counterpoint to a recent Ontario Court decision on standstills in Ventas v. Sunrise REIT.


Topps is a Delaware corporation engaged in the business of distributing collectible cards and confectionary items. Topps had struggled with profitability for some time and had recently been the subject of a public proxy battle. In 2006, Michael Eisner, who was familiar with Topps’ Chairman and CEO, expressed an interest in taking Topps private, although he was unwilling to negotiate in the context of a public auction. Eisner initially expressed a willingness to offer USD 9.24 per share, which was subsequently increased to USD 9.75 per share following negotiations with the board. Consistent with Eisner’s demands, Topps did not publicly announce that it was for sale. Topps and the Eisner Group then entered into a merger agreement, containing a "go-shop" clause that permitted Topps actively to solicit additional bids for a period of 40 days.

During the go-shop period, Topps could seek bids and accept a "Superior Proposal", defined as "a proposal to acquire at least 60% of Topps that would provide more value to Topps stockholders" than the Eisner Group acquisition. Once the 40-day period had expired, Topps could only negotiate with an "Excluded Party", being one whose involvement during the go-shop period was reasonably likely to lead to a Superior Proposal or with other unsolicited bidders themselves making a Superior Proposal. A two-tiered break fee was payable to the Eisner Group if Topps accepted a Superior Proposal: 3.0% of the transaction value during the go-shop and 4.6% of the transaction value thereafter.

A major competitor of Topps’ baseball card division, Upper Deck, expressed interest in buying Topps when contacted during the go-shop period. As is common, upon commencing due diligence Upper Deck entered into a standstill agreement that prevented it from disclosing that it had received confidential information or had any intent to bid for Topps. Both before and after the expiry of the go-shop, Upper Deck submitted a bid of USD 10.75 per share, the second time with no financing contingency and with a hell-or-highwater commitment to solve antitrust issues. However, on the basis of Upper Deck’s refusal to provide evidence of its ability to finance the offer, antitrust risk and a small reverse termination fee, the Topps board refused to treat Upper Deck’s offer as a Superior Proposal or declare Upper Deck an Excluded Party. The board also refused to release Upper Deck from its standstill such that Upper Deck could not publicly comment on its offer or launch a tender offer.

Certain shareholder plaintiffs and Upper Deck together moved for an injunction to delay the vote on the Eisner Group merger, alleging that the board had denied the Topps shareholders an opportunity to select the bid offering the greatest value.

The Court’s Decision

Vice-Chancellor Strine’s decision in Topps highlights several important points about directors’ duties under Delaware law, all of which will likely find resonance with Canadian judges when asked to look at similar issues under Canadian law.

First, courts will be very sensitive to perceived bias in process. In this case, Strine made it clear that a target board may only use a standstill agreement for its proper purpose, which does not include favouring certain bidders because of proposed post-purchase strategies such as management retention. Standstill agreements should be used to maximize, not impair, the value provided to shareholders through an auction. Strine’s judgement that there was a "reasonable probability...that the Topps board [was] misusing the standstill" led him to grant the injunction. He praised the Topps board for maintaining the ability to release Upper Deck from the standstill, a right that is often negotiated away during an auction to protect the successful bidder from being outbid by a losing party who "tops up" its offer after the auction has closed (See Sunrise REIT discussion below). Given that there was no canvass of the market completed before the Eisner Group merger agreement was executed, it was appropriate for Topps to retain this right. However, once Topps became aware that by releasing Upper Deck it could possibly unlock further value for its shareholders, the board’s continued enforcement of the standstill did not, to Strine, serve any apparent legitimate purpose. The board’s decision not to declare Upper Deck an Excluded Party was "highly questionable", in particular because it would have cost Topps nothing and would have opened the door to the possibility of greater value for shareholders. In light of the fact that the board had recommended Topps shareholders accept the Eisner Group offer, its focus should have been on "[pursuing] the highest price reasonably attainable".

Second, the use of go-shops to canvass the market for a better price post-signing may be a valid way for target directors to discharge their duty to seek the best price for shareholders in a change of control, depending on the circumstances. Go-shops have become more common in the U.S., in particular in private equity led deals, (and are occasionally used in Canada) as target boards seek to ensure satisfaction of their fiduciary duties while avoiding a public pre-signing market check, often strenuously resisted by potential buyers and potentially competitively damaging. The use of goshops may also reflect recognition of the fact that pre-signing auctions can be inefficient where management may have cause to favour a particular bidder. Strine suggested that go-shops may be an efficient way of encouraging other potential bidders to pay a higher price, because the knowledge that a credible buyer is willing to pay a certain price provides "some form of sucker’s insurance" validating the consideration of higher offers by others. Although Strine found occasion to criticize a post-signing market check in his earlier Netsmart decision (see our June 2007 Blakes Bulletin on M&A), in Strine’s view in Topps, the market should have been aware well before the deal was announced that the company was ripe for reorganization or sale. This again underscores the fact and context specific nature of these decisions. It is clear that if a go-shop is accepted, there must be real solicitation efforts made post-signing and in this case Topps met that obligation.

Strine also took no issue with the break fee that the Eisner Group would receive if Topps accepted another offer during or after the go-shop, stating that "the advantage given to Eisner over later arriving bidders is difficult to see as unreasonable". Preferential treatment that is given to certain bidders in return for meaningful concessions or deal certainty, and is not incompatible with maximization of shareholder value, is acceptable to the Delaware court.

Because of the relative novelty of go-shops, it is difficult to know how their use affects deal value. Although agreements subject to a go-shop are typically evaluated by financial advisors for fairness, the low number of jumped deals indicates that the locked-in price is most likely the final price that shareholders will receive. Matching rights that typically accompany go-shop provisions may also discourage competitive bidders.

Third, Strine was sympathetic to the suggestion that it may be necessary to proceed more cautiously in negotiations and due diligence with strategic buyers, particularly in industries where there are few players. He acknowledged that Topps had good reason to be suspicious of Upper Deck’s motives, as Upper Deck had not acted quickly to indicate genuine interest and had also proposed to limit its liability to a USD 12 million reverse break fee if it were unable to consummate the deal. Topps’ worry that Upper Deck, a major competitor of its baseball card division, would pay USD 12 million for no reason other than to stop the potentially threatening Eisner Group merger and to gain access to Topps’ confidential information was not entirely unrealistic according to Strine. However, if the Topps board was acting in good faith, it could have negotiated a higher reverse break fee to test Upper Deck’s commitment to the deal before declaring Upper Deck an Excluded Party.

Finally the Delaware courts and U.S. regulators have shown a willingness to second guess non-disclosure of material information in proxies. In this case, Strine was critical of the failure to disclose assurances made by the Eisner Group to top management about continued employment (which again would underscore perceived bias in the sale process) and a significant change in the assumptions underlying the valuation of the target company, which resulted in a change in the valuation range.

Canadian Implications

With consistent strong affirmations of the business judgment rule in Canada, it is unlikely that a Canadian court would have been as willing as Vice-Chancellor Strine to second guess a board’s decision-making, however, the Topps decision is noteworthy for Canadian transactions.

Although Canadian courts have not adopted the Revlon standard applied by Delaware, there is an expectation among investors and regulators generally in Canada that an issuer in a change of control scenario will act in a manner to maximize shareholder value. In this context, it is useful to see judicial sanction of the go-shop as a viable alternative to a pre-signing market check. It is also useful to see judicial sanction of an unequal diligence process when dealing with direct competitors.

Interestingly, notwithstanding the different outcome, this decision is arguably consistent with the recent Ontario court decision in which the enforceability of an agreement to enforce a standstill agreement was upheld. In Sunrise REIT, the Ontario court gave primacy to a commercial bargain and confirmed that an Ontario board can place limits on its rights to consider superior offers. In Ontario, such an agreement is not by definition invalid or unenforceable as long as the board has acted reasonably in creating a value maximizing process. See our March 2007 Blakes Bulletin on Securities Law. This is consistent with Vice-Chancellor Strine’s view that preferential treatment that is given to certain bidders in return for meaningful concessions or deal certainty, and is not incompatible with maximization of shareholder value, is acceptable. In Sunrise REIT, the trustees in good faith, and to conclude a transaction, had bargained away their right to waive the third party standstill. In Topps, the boards had maintained the ability to waive the standstill but, as Strine notes, were bound to use that contractual power only for proper purposes.

Post Script

On June 25, 2007, Upper Deck commenced an unsolicited take-over bid to purchase the Topps common shares at USD 10.75 per share.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
27 Oct 2016, Seminar, Toronto, Canada

Please join members of the Blakes Commercial Real Estate group as they discuss five key provisions of a commercial real estate purchase agreement that are often the subject of much negotiation but are sometimes misunderstood.

1 Nov 2016, Seminar, Toronto, Canada

What is the emotional culture of your organization?

Every organization and workplace has an emotional culture that can have an impact on everything from employee performance to customer or client satisfaction.

3 Nov 2016, Seminar, Toronto, Canada

Join leading lawyers from the Blakes Pensions, Benefits & Executive Compensation group as they discuss recent updates and legal developments in pension and employee benefits law as well as strategies to identify and minimize common risks.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.