Topps' $1.3B SPAC merger died a day after MLB said it would not renew the card licence

In April 2021, Topps, the trading-card and confectionery company founded in 1938, agreed to go public by merging with the blank-check company Mudrick Capital Acquisition Corporation II, in a deal that valued it at $1.3 billion. Chairman Michael Eisner, the former Disney chief executive, had told CNBC that Topps chose a SPAC for its flexibility and limited distraction to management.

On 19 August 2021, Major League Baseball and the MLB Players Association notified Topps that they would not renew their respective agreements when they came up at the end of 2025 and 2022. MLB had partnered with Topps on baseball cards since 1952 and received a royalty on the cards it sold. CNBC reported that MLB was expected to give its trading-card business to Fanatics.

The next day, Mudrick announced in an SEC filing that the merger had been 'terminated by mutual agreement' because of MLB's decision. Topps said it would remain a private company; it had been publicly traded before being taken private in 2007.

The $1.3B merger was terminated and MLB's trading-card business was expected to go to Fanatics, ending a partnership dating to 1952.

Baseball cards, which Topps had made under MLB licence since 1952, anchored the business that the $1.3B valuation rested on.

The MLB and players' union agreements were due to end in 2025 and 2022, so the core licence was not secured when the listing was announced.

The licensors chose not to renew, and CNBC reported the rights were expected to move to Fanatics.

A listing story is only as strong as the contract it rests on. If one licensor controls the core product, its renewal is the deal, and the valuation should be tested against it.

Topps said it expected to produce substantially all its current licensed baseball products through 2025 under existing agreements, and would build on a strong second quarter of 2021 in its Sports & Entertainment and Confections segments. It retained licensing deals with Major League Soccer and the National Hockey League.