Case 3: Ben & Jerry’s
1) Ben & Jerry’s has not been successful in fulfilling all three elements of its mission statement. Ben & Jerry’s has been successful in the element of “Product”; they have continued to make, distribute, and sell the finest quality super premium ice cream in a wide variety of flavors. Ben & Jerry’s has also been successful in the element of “Social”. Since 1985 Ben & Jerry’s has donated 7.5% of its pretax earnings to various social foundations and community-action groups. Ben & Jerry’s has not been successful in the element of “Economic”. Their Economic element of the mission statement was to operate by profitable growth and increasing value for the shareholders. They have not achieved those goals.
2) Ben & Jerry’s become a takeover target due to the increased competitive pressure and declining financial performance. Their stock price has puttered around the same level for years despite regular sales and earnings increases. In addition to their low price/earnings ratio in comparison with their competitors, so company looking to acquire Ben & Jerry’s could see their low price/earnings ratio as a indication that they are undervalued and would be a good investment. Ben & Jerry’s also has a great brand recognition and large portion of the super-premium ice cream market. They are portrayed to other companies as having great earning potential, since for years they have increased sales and earnings which are appealing to other companies.
3) To obtain a reasonable valuation of what Ben & Jerry’s might be worth to another firm, the following valuation methods estimate Ben & Jerry’s to have ratios that fall between the competing companies “Dreyer’s Grand” and “Eskimo Pie.”
By multiplying Ben & Jerry’s book value by Dreyer’s Grand’s Price/Book ratio, it comes out to be $697.32 million. By doing the same method as described previously with Eskimo Pie instead of Dreyer’s, the value...
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