CASE 5: ESKIMO PIE CORPORATION
Date of Presentation: Friday 17/12/15 (Time & Venue: To be determined) 1. What is the estimate value of Eskimo Pie Corporation as a stand-alone? 2. Why would Nestle want to acquire Eskimo Pie? Are there potential synergies? Is Eskimo Pie worth more than it’s worth as a stand-alone company? 3. As an advisor to Reynolds, would you recommend the sale to Nestle or the proposed initial public offering?
(You can use simple discounted cash flow model or variety of comparable public firms trading multiples in assessing the value of the company)

1. What is your estimate of the value of Eskimo Pie Corp as a stand alone company?

Luckily, I checked my e-mail this afternoon, so using a WACC of 16%, an FCF of $4,004,000, and $13,000,000 cash reserve (pg 593) I came up with this table in excel.

growth rate (g) value total after adding cash $13 mil
0.06 42,442,400.00 55,442,400.00
0.07 47,603,111.11 60,603,111.11

0.08 54,054,000.00 67,054,000.00
0.09 62,348,000.00 75,348,000.00
0.10 73,406,666.67 86,406,666.67
0.11 88,888,800.00 101,888,800.00
0.12 112,112,000.00 125,112,000.00

2. Why would Nestle want to acquire Eskimo Pie? Are there potential synergies? Is Eskimo Pie worth more to Nestle than it is worth as a stand alone company?

Nestle acquiring Eskimo Pie would be a horizontal acquisition, Nestle is familiar with the type of business Eskimo Pie conducts. In fact, many of the products Nestle produces are similar to Eskimo Pie’s product line. Also with Eskimo Pie’s ability to license ingredients, Nestle would have more control over some of their competitors.

There are potential synergies between the two companies. Nestle has a potential synergy in its Carnation and Drumstick units. Production facilities for the two companies’ products could be