Ben And Jerry's Homemade, Inc.
Ben and Jerry’s
Background –
This case examines issues of asset control for Ben & Jerry's Homemade, Inc., in light of the outstanding takeover offers by Dreyer's Grand, Unilever, Meadowbrook Lane and Chartwell Investments, in January 2000. The case provides a unique opportunity to discuss fundamental firm objectives and the implications of a nontraditional corporate orientation such as generous philanthropy and charitable donations.
Issues – * Why is the organization considering takeover offers? * Are any of the takeover offers best for the company and its investors? * Corporate governance issues with the company charter.
The firm is considering takeover offers assumingly because the competition is attempting to gain market share. There is no evidence in the case which …show more content…
points to any need to sell the company. The data indicates the organization is marginal but its performance has proven to be sustainable. Until recently the stock price has underperformed both the industry portfolio and S&P 500. The P/E and P/B Industry Comparables are average. Net Sales, and Net Income has increased year over year, however working capital been declining for the past 3 years. Considering the market share, 45% shareholder equity could be higher.
When considering the takeover offers, maximizing shareholder value should be the prominent motive.
Since 1996, Ben and Jerry’s return on shareholder equity has been increasing, but it has not been sufficient according to financial reporter, Richard McCaffrey. Because the financial market indicates investor’s perceived value, one way to evaluate the value created by the offers is to use the P/E and P/B ratios consider the how equity value would change considering the viable offers,. Dryer’s Grand and Unilever are the two offers that allow the management team to stay in place as well as provide considerations and acknowledgement of the company’s desire to pursue charitable interest. Charitable interest pursuit is protected by the company charter, which makes provisions for preferred stock holders to limit the votes of common stock holders and gives them special voting rights for transactions such as mergers and tender offers. Ben and Jerry’s foundation, Inc. owns all of the preferred stock and therefore has the final say in merger offerings. The offers by, small cap, Dreyer’s Grand; $31 (stock) and large cap, Unilever $36 (cash) are the most reasonable to
consider.
* The Dryer’s Grand offer: * P/E Ratio of $31/$1.06=29.25 * P/B Ratio of $31/$11.82=2.62
* The Unilever offer: * P/E Ratio of $36/$1.06=33.96 * P/B Ratio of $36/11.82=3.05
* Ben and Jerry’s Current * P/E Ratio is 21/1.06=19.8 * P/B Ratio is 21/11.02=1.08
Based on P/E and P/B ratio alone, the Unilever offer would position Ben and Jerry’s as the second highest in the industry for both P/E and P/B ratios, which would show a clear sign of commitment to shareholder value.
If I were advising the board, I would recommend accepting the Unilever offer. It creates the most shareholder value.
Background –
This case examines issues of asset control for Ben & Jerry's Homemade, Inc., in light of the outstanding takeover offers by Dreyer's Grand, Unilever, Meadowbrook Lane and Chartwell Investments, in January 2000. The case provides a unique opportunity to discuss fundamental firm objectives and the implications of a nontraditional corporate orientation such as generous philanthropy and charitable donations.
Issues – * Why is the organization considering takeover offers? * Are any of the takeover offers best for the company and its investors? * Corporate governance issues with the company charter.
The firm is considering takeover offers assumingly because the competition is attempting to gain market share. There is no evidence in the case which …show more content…
points to any need to sell the company. The data indicates the organization is marginal but its performance has proven to be sustainable. Until recently the stock price has underperformed both the industry portfolio and S&P 500. The P/E and P/B Industry Comparables are average. Net Sales, and Net Income has increased year over year, however working capital been declining for the past 3 years. Considering the market share, 45% shareholder equity could be higher.
When considering the takeover offers, maximizing shareholder value should be the prominent motive.
Since 1996, Ben and Jerry’s return on shareholder equity has been increasing, but it has not been sufficient according to financial reporter, Richard McCaffrey. Because the financial market indicates investor’s perceived value, one way to evaluate the value created by the offers is to use the P/E and P/B ratios consider the how equity value would change considering the viable offers,. Dryer’s Grand and Unilever are the two offers that allow the management team to stay in place as well as provide considerations and acknowledgement of the company’s desire to pursue charitable interest. Charitable interest pursuit is protected by the company charter, which makes provisions for preferred stock holders to limit the votes of common stock holders and gives them special voting rights for transactions such as mergers and tender offers. Ben and Jerry’s foundation, Inc. owns all of the preferred stock and therefore has the final say in merger offerings. The offers by, small cap, Dreyer’s Grand; $31 (stock) and large cap, Unilever $36 (cash) are the most reasonable to
consider.
* The Dryer’s Grand offer: * P/E Ratio of $31/$1.06=29.25 * P/B Ratio of $31/$11.82=2.62
* The Unilever offer: * P/E Ratio of $36/$1.06=33.96 * P/B Ratio of $36/11.82=3.05
* Ben and Jerry’s Current * P/E Ratio is 21/1.06=19.8 * P/B Ratio is 21/11.02=1.08
Based on P/E and P/B ratio alone, the Unilever offer would position Ben and Jerry’s as the second highest in the industry for both P/E and P/B ratios, which would show a clear sign of commitment to shareholder value.
If I were advising the board, I would recommend accepting the Unilever offer. It creates the most shareholder value.