6/29/2007 2:21:34 PM

By Kevin Haake

Upper Deck’s $427.3 million cash offer to acquire Topps now appears to come with a cash insurance policy. Upper Deck has offered an additional $28.5 million reverse breakup fee to Topps should an approved deal be killed by government antitrust laws, according to a letter filed this week by Upper Deck with the Securities Exchange Commission.

Breakup fees are a common feature in mergers, but it’s usually the company being acquired that is required to pay. This happens as a safeguard against the targeted company to agree to a deal in the sole hope that additional buyers will bid up the price. The “reverse” breakup fee, like the one offered by UD, is more common in a “seller’s” market.

In addition to outlining the $28.5 million reverse breakup fee, the letter also states that, “If a league or players association objects to the merger transaction, Upper Deck will discuss modifying the license agreement in order for such league or PA to withdraw its objection and, if necessary, terminate the Topps license or Upper Deck license with such league or PA.” The filing also states that Upper Deck will exercise similar options should antitrust concerns be raised by government regulators.

Topps on Thursday issued a statement saying that the provisions of the SEC filing by Upper Deck did not constitute antitrust approval and that “no such approval has been obtained.”

Topps’ original agreement with Michael Eisner’s Torante Company, a private equity group, and the Chicago-based private equity firm Madison Dearborn Partners, called for Topps to pay a breakup fee of $12 million if the previously agreed upon deal fell through.

Upper Deck’s SEC filing came one week to the day after Topps granted a waiver to Upper Deck allowing it to communicate directly with its shareholders.

In a letter sent to the Topps board of directors earlier this week informing them of Upper Deck's $427.3 million cash tender offer, Upper Deck president Richard McWilliam said a merger of the two companies “would best serve both Upper Deck and Topps and their respective stockholders.”

Topps on Thursday also announced that it is actively reviewing Upper Deck's offer and that, by law, it is required to recommend a course of action (or inaction) to its shareholders.

According to Upper Deck spokesperson Don Williams, "Upper Deck’s tender offer is currently set to expire on July 24. But, based on Topps' response to the offer, Upper Deck has the right to extend the offer’s expiration deadline."

Want the complete story on the impending buyout and the legal battle brewing between Topps and Upper Deck? Then don’t miss the August issue of Beckett Baseball,#269, available on newsstands nationwide, July 11.