Card collectors have been bidding up Topps cards to record heights over the past year. Now, Michael Eisner and hedge fund manager Jason Mudrick are planning to allow stock investors the same chance with Topps itself; the duo have inked a deal to bring the collectibles business public in a $1.3 billion SPAC deal.
A blank check business, Mudrick Capital Acquisition Corp. II, is bringing public Eisner’s closely held Topps in a deal that includes up to $571 million in cash. The cash will consist of the $321 million Mudrick’s SPAC holds from its IPO last year, plus as much as $100 million new funding from Mudrick Capital—Mudrick’s investment management business—as well as $150 million from institutional investors GAMCO and Wells Capital, a divison of Wells Fargo Bank. The funds will be used to buy out most of Madison Dearborn Partners, an investment fund that teamed with Eisner’s Tornante Company to buy Topps in 2007. While there are more than 100 active sports-related SPACs, Mudrick isn’t one of them, having stated in its business plan it wanted to acquire a turnaround opportunity in character with sponsor Mudrick Capital’s expertise in distressed businesses.
“The Tornante company turned down a larger SPAC offer to go with the Mudrick team because they felt the Mudrick team has the credibility, the network and expertise, and are a team with integrity who are going to invest for the long term,” spokesperson Keil Decker said in a phone call.
The deal is expected to close by the third quarter this year. When it does, Milwaukee Bucks co-owner Marc Lasry and former U.S. women’s national soccer team coach Jill Ellis will be among four new directors of the company. Eisner also owns England’s Portsmouth Football Club and a series of entertainment businesses through Tornante.
While the business goes public, Eisner will remain firmly in control of Topps. He will be the largest shareholder of the new entity with 36% of the company, all of which will be in a dual share structure that will give Tornante 10 times the voting power of common shares, according to information on the transaction posted to the Topps website. The public investors through the SPAC will own 28% of Topps equity while Mudrick will have about 15%. GAMCO, Wells, Madison Dearborn and Topps management will round out the shareholding groups.
Topps disclosed that its sales jumped 23% to $567 million in 2020 and generated net income of $8.8 million. Notably, the company recorded a loss of $13.2 million on the sale of a subsidiary and paid $13.1 million in interest expenses in 2019. In two years, Topps says, sales will be $777 million and the business will be generating $78.6 million in net income. The business expects to grow through expansion into blockchain—such as NFTs—as well as mobile games and apps for consumers to trade and chat with other collectors.
Collectibles have been among the sports business’ hottest categories, driven by a combination of nostalgia and technological advances. In February, Mets owner Steve Cohen led a group to take Collectors Universe private in a deal valuing that business at $700 million.
Shares of Mudrick Capital II jumped as high as 16% in trading today on the news.
(This story has been corrected to note the name of Mudrick founder and CIO as Jason Mudrick in the first paragraph.)