This website uses cookies to ensure you have the best experience. Learn more

Eskimo Pie Case Study

634 words - 3 pages

Reynolds Metals, the majority owner, has decided to sell its ice cream company Eskimo Pie Corporation. Nestle Foods provided the highest offer of $61 Million. Due to delays in Nestle’s purchase, Reynolds Metals has taken other options into consideration, including the IPO proposal by Eskimo Pie Corporation President David Clark. This analysis will identify the current value of the company, explain why Nestle Food would want to buy this company, and the synergies involved for their reasoning. It will also discuss the benefits of each option, and provide a recommendation.
First, the discount rate, which is the required rate of investors for this type of investment, is found. In 1990, Eskimo Pie had long-term debt obligations of $744 thousand, and had $19.496 million in Stockholder’s equity. Therefore, there financing was composed from about 3.68% debt and 96.32% equity.
The stand-alone value of Eskimo Pie should depend on the ...view middle of the document...

Nestle’s proposal to buy Eskimo Pie intends for the two companies to get consolidated. They would be able to eliminate Eskimo Pie’s management and utilize existing equipment to cut down on overhead. The purchase price is larger than the stand-alone analysis price most likely due to Nestle evaluating the company based on acquisition synergy. By combining the company value on a stand-alone basis of future cash flow (non-synergistic buyer) with the cash flows related to the apparent synergistic benefits (related to Drumstick), Nestle determined its purchase price of $61 million.
Reynolds Metals will benefit more financially by not selling to Nestle Foods. Both estimated stand-alone values are less then the purchase price, but Reynolds Metals will have to pay significantly high capital gains by selling to Nestle. Capital gain taxes will take a large sum of the cash. On the other hand, Nestle will benefit from the purchase because it will get a tax break from borrowing money to the purchase company and as mention above, buying Eskimo Pie will lower overhead cost by eliminating Eskimo Pie management and Nestle utilizing existing facilities and eliminating sublicensing costs creating greater cash flows.
Based on the projections, Eskimo Pie Company is expecting sales growth. It is undervalued compared to its industry average. Going through with the initial public offering will create higher market value of the company and generate enough cash to finance the IPO. In addition, the IPO will benefit senior management, employees, and the community. Reynolds Metals will receive upfront of 84% of $15 Million dollars of dividends and the value of the stock would increase because it will be valued based on the market. Wheat First will benefit as a banker that could provide additional debt needs to Eskimo Pie.
In conclusion, I recommend that Reynolds Metals chose the IPO option over selling the company to Nestle. The IPO will provide adequate financing, and keep the existing company intact. The Nestle purchase is a good value according the present value based on a future value, although the price is undervalued according to the Company Comparison Valuation Method. Nestle also has no intention of keeping the company intact.

Other Papers Like Eskimo Pie Case Study

Designing Servey Strategies Res 351 Week 3

1159 words - 5 pages Designing Survey Strategies Kevin Tagliabue RES/351 March 13, 2013 Amanuel Gobena Designing Survey Strategies Survey strategiesPart 1. Choose the survey method(s) you would most probability use for each research objective. Explain your choice(s). No. | Research Objective | Questionnaire Survey* | Observational Survey** | Experimental Study*** | Explain | 1 | You want to know what percent of the U.S population approves the

Finance Manager Essay

5554 words - 23 pages EMBA 2012-2013 by Virginia Santamarina from September 2012 to March 2013. UV0273 -16Exhibit 6 BEN & JERRY’S HOMEMADE Investor-Value Measures: Ben & Jerry’s and Industry Comparables Price/Earnings Price/Book Dreyer’s Grand 47.2 7.8 Eskimo Pie 30.7 1.1 TCBY Enterprises 12.5 1.2 Yocream International 9.4 1.8 Ben & Jerry’s 19.8 1.8 Source: Case writer analysis. This document is authorized for use only in EMBA 2012-2013 by Virginia Santamarina from September 2012 to March 2013.

Hardtech, Inc and Mearl Oil Case Analysis

591 words - 3 pages for project time, cost, and quality while simultaneously battling scope creep. Traditional/functional organizations operate at the opposite end of the spectrum which tends to be more rigid (not adaptable), lacking broad subject matter expertise, and keep people protecting their own slice of the pie (their specific department). Matrix orgs force people to work for the good of the organization as a whole. #2 Mearl Oil Case Study) Mearl Oil

5 Spots To Satisfy Your Sweet Tooth

1070 words - 5 pages cost as much as a college textbook. These five spots will cure sugar lust-at least until your next study session, and all are astonishingly easy-on-the-wallet. Some of the tastiest, most popular items on the menu will put you out less than six bucks. So, on a sunny spring day, go fish out a few bucks from your laundry, beg for change, do whatever you have to--these cheap sweets are worth it--and they're all less than five minutes away. Swiss

Human Rescuse

564 words - 3 pages BA336 Human Factors in Small Businesses Case study for The Appeal of Franchising Zhuo Xu (7751) Question 1: From this case we can know franchisees also benefit from the franchisor’s business experience. In fact, experience is, in essence, what a franchisee buys from a franchisor. Franchising can be the ideal path to owning a business for people in almost any phase of professional life, whether they are retirees looking for a new

Mobile Wallet

1648 words - 7 pages couldn’t ditch his wallet? 2. Verify that the facts, assumptions, and data presented in the case study are still valid and applicable. 3. Using Porter’s Competitive Forces Model, evaluate the mobile payment industry. 4. Using SWOT analysis, evaluate the different payment methods. 5. Using BCG matrix with predictive market share and predictive growth rate, evaluate the feasibility of these mobile technologies. 6. Draw the

Ielts Writing

3721 words - 15 pages How to prepare for IELTS - Writing Contents Page Details of the writing test Task 1 Bar and line graphs, pie charts & tables Process or flow charts Objects/how something works How to prepare for Task 1 Task 2 Questions How to prepare for Task 2 General tips for writing 2 2 4 7 9 10 13 14 17 19 Make sure you have a copy of the How to prepare for IELTS – FAQs booklet in addition to this booklet. 1 How to prepare for IELTS

Vices Its Effect

662 words - 3 pages | Calculate the % of men that are left-handed and right handed in your study: 12 / 120 total men = 0.10 X 10 = 10% of men were left-handed 108 / 120 = 0.90 X 100 = 90% of men were right-handed Do the same for women: 7 / 140 total women = 0.05 X 100 = 5% left handed 133 / 140 = 0.95 X 100 = 95% right-handed Plot these percents as bars: Or plot as stacked bars: Or plot as a pie diagram.

Biddy`S Bakery Case Study

588 words - 3 pages Assignment1: Biddy`s Bakery Case Study Odontuya Erdenebileg Bus 515 Professor, Dr. Travis Davidson July 18, 2012 Explain the challenge Elizabeth faced in meeting her capacity needs and what she should have considered before moving into the larger facility. However, initially sales were slow at the beginning, after a few years Biddy`s Bakery began to attract an attention of customers thus, first floor of “Biddy`s” home couldn`t

Effects of Daily Allowance to the Study Habits

4937 words - 20 pages . Whatever is going on around you and inside your own mind is going to affect your study habits. Age: if you are very young, it's harder to concentrate for long periods Determination: If you want to succeed, you will work harder than if you don't really care about something Social Factors: sometimes you don't have a lot of money, and you end up living somewhere noisy and distracting. In this case, you can study at the library, or at school

Review the Range of Groups and Individuals Whos Communication Needs Must Be Addressed in Own Job Role

702 words - 3 pages SHC 51: USE AND DEVELOPMENT SYSTEMS THAT PROMOTE COMMUNICATION 1.1.5 Use different means of communication to meet different needs Makaton Signs and Symbols Body language Facial Expressions MEANS OF COMMUNICATION Lip reading Written word Texts E mails Sign Language Above are just some of the means of communication, i will in the following case study, show different means of communication to meet different needs. By using

Related Essays

Eskimo Pie Solutions Essay

4307 words - 18 pages of vanilla ice cream, was the first ice cream novelty. Its history appears on the Eskimo Pie box: Genuine Eskimo Pie . . . ________________________________________________________________________________________________________________ Professor Richard S. Ruback and Research Associate Dean Mihas (MBA ‘92) prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements

Eskimo Pie Essay

2918 words - 12 pages Case 2: Harris Seafood Finance 380: Cases in Financial Decision Making Bojan Balaban, Tijo Jose, Nathan Liu NPV CALCULATIONS Charlie Harris is debating whether or not he should make an investment in the shrimp processing plant. We have concluded that he should make the investment in the processing plant if net present value (NPV) is positive. The NPV is calculated as: NPV= PV(benefits) – PV(cost) The goal here is to create value

Critical Thinking Essay

1138 words - 5 pages Summary of the Essay Bonnie Steinbock wrote a controversial essay justifying adultery under some circumstances. The essay begins by giving statistical data on a Case study of infidelity that found out that forty percent of wives had been infidels in their marriage. The study suggests that just like men in a marriage institution, women are also catching up with adultery. She claims that the rise in female adultery can be attributed to the recent

New Venture Pest Analysis

5114 words - 21 pages Itinerary Engineering (PIE) allows university students to create a personalized day-to-day schedule with a few simple clicks. The service would be free for students as universities would pay PIE to purchase the service for their students. Through collaboration with universities, it would be able to ensure that we always have the updated course syllabus of all courses being offered in any given term. For a student to get a personalized schedule, they