Eskimo Pie Case.ppt

Eskimo Pie Case January 19, 2006 Basic Steps to Valuation in Finance Estimate cash flows Cash - after tax, consumable Sometimes easy (fixed incomes), sometimes hard (residual claims) Choose a discount rate opportunity rate on alternative risk adjusted Calculate present value and net present value and decide if worth more than costs Updated Estimates in Valuation Sensitivity to Operating Ratios Eskimo Pie Cost of Capital Valuations under Varying Rates Valuation Using Comparables Eskimo Pie Share Price 1992-99 Post-IPO Performance of Eskimo End of the Eskimo Pie Story * J. K. Dietrich - FBE 532 – Spring 2006 Estimated WACC using short-term and long-term Treasuries: Assuming $4.4 million assumed in the case FCF ($4 + .4) grows in perpetuity and omits $13 million in excess cash available for payment to buyers On November 17, 1998, an unsolicited offer from Yogen Fruz World-Wide Incorporated to acquire 100% of Eskimo Pie for $10.25 per share was rejected by Eskimo Pie’s Board. Yogen Fruz responded with a $13 conditional offer on December 2, 1998, and the Board requested its financial advisors to examine the “full range of strategies to enhance shareholder value” (p. 13, 1998 Annual Report). On May 3, 2000, the company agreed to be acquired by Cool Brands, Yogen Fruz’ successor, for $10.25 per share. Shareholders accepted the offer on September 6. * * * * * EPIEPrice2001 EPiePrice91-99 EPIE Date Price 77446.00 ?1992?/?3?/?31 20.50 33694.00 77446.00 ?1992?/?4?/?30 20.00 33724.00 77446.00 ?1992?/?5?/?29 22.50 33753.00 77446.00 ?1992?/?6?/?30 21.25 33785.00 77446.00 ?1992?/?7?/?31 22.25 33816.00 77446.00 ?1992?/?8?/?31 19.25 33847.00 77446.00 ?1992?/?9?/?30 15.25 33877.00 77446.00 ?1992?/?10?/?30 16.75 33907.00 77446.00 ?1992?/?11?/?30 18.25 33938.00 77446.00 ?1992?/?12?/?31 16.75 33969.00 77446.00 ?1993?/?1?/?29 21.25 33998.00 77446.00 ?1993?/?2?/?26 21.75 34026.00 77446.00 ?1993?/?3?/?31 21.50 34059.00 77446.00 ?1993?/?4?/?30 19.25 34089.00 77446.00 ?1993?/?5?/?28