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Major League Baseball’s breakup with Topps Co. smacked Michael Eisner on the back of the head — even though a few months earlier he waved off concerns from other financial players who had flagged it as a risk, sources told The Post.
The former Disney honcho — who became chairman of the iconic baseball card maker in 2007 — got blindsided earlier this month when MLB announced it was ending its 70-year relationship with Topps in favor of a new, long-term tie-up with Fanatics, the fast-growing sports-merchandise maker.
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Indeed, Mudrick Capital — a hedge fund that had agreed to take Topps public with a blank-check company that valued the business at $1.3 billion — said it hadn’t caught wind of MLB’s surprise decision until the day it was announced.
Nevertheless, insiders say potential investors had specifically asked Eisner about the risks of Topps losing its MLB contract earlier this year when the company tried to sell itself in a February auction to capitalize on a pandemic-driven explosion in demand for sports collectibles.
In response, they say, Eisner told them there was nothing to worry about.
"We speak to them every day," Eisner said of MLB in a private call with prospective bidders at the time, according to a source who was briefed on the call. "We are really partners with them … our brand is inextricably tied with their brand."
That’s despite the fact that there was chatter last winter that rival sports-card maker Panini was making a play for the baseball card contract at the time, according to an adviser who participated in the auction.
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Suitors were likewise worried that Fanatics, whose hard-charging CEO Michael Rubin had inked a merchandise deal with MLB just two years earlier, might be looking to broaden his business ties with MLB.
"He was convinced they would not lose their contract," the source said of Eisner, adding that the legendary media mogul would only entertain the possibility that the costs for the license might rise, even as he insisted that the contract would be renewed.
"I don’t know how you could completely dismiss the possibility," the source added.
Despite Eisner’s confidence, some suitors at the time thought Eisner’s hubris could cost him, according to the adviser. In fact, one Topps bidder walked away, believing it couldn’t get financing because of the uncertainty around the MLB contract, the adviser said, declining to name the firm.
"There was no way to underwrite the sports cards part of their business," which represented 55 percent of Topps sales, according to the source. "How do you underwrite a contract coming up for renewal?"
Topps had become vulnerable to the MLB snub because its owners had been under-investing in the business, sources said. Private equity firm Madison Dearborn Partners controls Topps, which it bought in 2007 in partnership with Eisner’s investment firm Tornante Co.
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Madison Dearborn declined to comment. A spokesman for Eisner also declined to comment.
"I think there was a very clear dynamic between Madison Dearborn and Eisner," a source said. "Eisner wanted to invest more in the business and Madison Dearborn did not."
In fact, Topps invested only $2 million in capital expenditures in 2019 and $1 million in 2020, according to an investor presentation, which boasted of Topps’ modest spending. The plan was to increase capex to $5 million annually in 2021 and 2022, the presentation said. (For perspective, the company’s 2020 revenue was $567 million.)
"The Topps management team said there was a lot we can do to grow the business but we don’t have the capital to do it," the analyst said. "That probably left an opening," the analyst added, noting that rivals like Fanatics were more aggressively getting into non-fungible tokens (NFTs) expanding the trading cards business.
Others noted that Topps insisted its budget was tight even as the company in October borrowed $200 million, some of which was used to pay its owners a dividend.
"Clearly, Topps was diverting a whole lot of cash to themselves," an insider said.
Topps Executive Chairman Andy Redman earlier this month said the company wasn’t aware MLB was negotiating with anyone else.
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"Not only were we unaware that Major League Baseball was negotiating with anybody other than Topps regarding our rights beyond 2025, but we were abruptly informed … that a deal was completed, finalized and exclusive with Fanatics," he said.
Meanwhile, sources said 79-year-old Eisner, who ran Walt Disney Co. from 1984 through 2005 and who was planning to remain Topps chairman after the merger, tried to give investors the impression that he brought value to the MLB relationship, even as it slipped through his fingers.
"I don’t know if Eisner matters as much as he thinks he does," the adviser added. "Young people don’t care about Eisner."
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