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Ben & Jerry's needs resolution to the following issues: How did Ben & Jerry's become a takeover target? Should Morgan support a takeover?

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Introduction

Ben & Jerry's Problem Statement Ben & Jerry's needs resolution to the following issues: * How did Ben & Jerry's become a takeover target? * Should Morgan support a takeover? > If so, by who, and at what price? > If not, why not? If the company is not generating value for its shareholders consistently, it might consider the various takeover-offers on the table. To evaluate this we need to consider impacts on the company's ability to operate independently to carry out the threefold corporate mission (Product, Economic and Social). This document will offer both detailed analysis to evaluate this problem and recommendations for moving forward. Current Financial Analysis With the formation of ice-cream joint venture by Pillsbury and Nestle, Pillsbury distribution channel was no longer advantageous for Ben & Jerry's. Despite the 45% market share in super premium ice-cream market and the great brand equity, the company has been consistently under-performing and its share price has not seen any changes from its current price of $21. ...read more.

Middle

Company Valuation and Share Price Ben & Jerry's net income has been on the rise (from 59% to 93%) but the cost-to-sales ratio has decreased from 65% in 1998 to 61% in 1999, accrediting some of the increase in net income to the reduction in cost. Although one can argue that if the company is making profits then why sell it but it's worthwhile to notice that the working capital has been declining which means reduction in future sales. Company's total assets have been almost the same ($150M) for the past two years indicating a very slow expansion [See Exhibit 3]. For this reasons it seems to be a good option to sell the company to one of the interested candidates. Getting financing from investors to expand will not be a good move, as this would not change the management priorities and its social interests. Based on the multiples valuation method, Ben & Jerry's share price is evaluated to be $33.04 [See Exhibit 4]. The offer price of Unilever is well above the valued price. ...read more.

Conclusion

board members from Chartwell * Install new management - loss of valuable members * No social interests Exhibit 2 - Quantifying the takeover offers Dryer's Unilever Meadowbrook Chartwell Management Autonomy 3 5 5 5 Offer Price 3 5 4 3 Change Priorities 3 5 5 4 Reorganization 2 5 3 3 Community Service 4 4 4 3 Total 15 24 21 18 Exhibit 3 - Ben and Jerry's Financial Performance Exhibit 4 - Multiples model used to calculate share price Inputs Current Share Price $21 Total shares outstanding 7,562,221 Price/Earnings Price/Book Price/Sales Dreyer's Grand 47.2 7.8 0.5 Eskimo Pie 30.7 1.1 0.58 TCBY Enterprises 12.5 1.2 2.5 Yocream International 9.4 1.8 0.7 Ben & Jerry's 13.2 1.7 0.67 Average 22.6 2.72 0.99 Measures of Ben & Jerry's Sales $237,000,000 Net Income (earnings) $12,000,000 Book value of equity $89,400,000 Per Share xMultiple Implied Price Sales per share $31.34 0.99 $31.03 Net income per share (EPS) $1.59 22.60 $35.93 Book value of equity per share $11.82 2.72 $32.15 Implied Price Average $33.04 Value of Equity $249,833,095 Sources 1 US Securities and Exchange Commission: http://www.sec.gov/cgi-bin/srch-edgar 2 Investment research site: http://www.morningstar.com/ ...read more.

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