EF4313 - Individual Case Questions:
“Eskimo Pie Corporation”
You are responsible for handing in written answers to the following questions drawn from the Eskimo Pie Corporation case. You can work with others on this assignment, but each individual must hand in their own set of answers.
1. Why do the managers of Eskimo Pie want to find an alternative to the Nestle acquisition?
Generally, there were two reasons the managers of Eskimo Pie want to find the alternative. First, the manager didn’t want to lead to the disappearance of Eskimo where they work and which they build. If Nestle acquired Eskimo Pie, Nestle would then restructure the Eskimo Pie since Nestle aimed at the goodwill rather than the whole company. Therefore, the restructuring may influence the management because they will be out of work. Second, the acquisition of the independent business by the large multinational, Nestle, will affect the community and workers. Moreover, Nestle will finalize all licensing agreement and will produce the product themselves by taking advantages of its scale and distribution network. So, Eskimo Pie will be transformed to be a product line of Nestle rather that a company again.
2. Why would Nestle want to acquire Eskimo Pie? Are there potential synergies such as economies of scale? Is Eskimo Pie worth more to Nestle than it is worth as a stand-alone company?
3. What would be the capital structure (i.e., debt ratio) of Eskimo Pie after its IPO if Reynolds Metals accepts the two-step transaction proposed by Wheat First?
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