Eskimo Pie Corporation
Mergers, Acquisitions, Restructurings, and Corporate Governance Eskimo Pie Corporation
Copyright © 1992 by the President and Fellows of Harvard College. Harvard Business School case 293-084.
In early 1991, Reynolds Metals, the makers of Aluminum Foil and other aluminum products, decided to sell its holding of Eskimo Pie, a marketer of branded frozen novelties. Reynolds had few interests outside its aluminum and packaging business, and the Eskimo Pie Corporation, with roughly $47 million in sales, accounted for less than 1% of Reynolds revenues. Reynolds planned to use the proceeds from the sale of Eskimo Pie to fund investments in its core aluminum business. Eskimo Pie was 84% owned by Reynolds Metals and 4% owned by the Reynolds Foundation. The remaining 12% of Eskimo Pie was held by various Reynolds family members and a small group of outside investors. Goldman Sachs, a New York investment-banking firm, was retained to assist with the sale of Eskimo Pie. Goldman estimated that the sale price of Eskimo Pie would be about 1.2 times 1990 sales or about $57 million. In 1990, Nestle Foods paid a comparable multiple for Drumstick, another ice cream novelty company. Goldman organized an auction for Eskimo Pie, and Nestle was the highest of six bidders, with a price of $61 million. Mr. David Clark, president of Eskimo Pie Corporation, recognized that the sale of Eskimo Pie to Nestle would mean the end of its independence. Nestle was likely to consolidate its ice cream novelty businesses by eliminating, Eskimo Pie's headquarters and management staff. Clark had struggled to find a way to keep the company independent since he first learned of the sale, but he had been unable to raise sufficient funds, to purchase Eskimo Pie in a Leveraged buyout (LBO), and the sale to Nestle seemed inevitable. Background Eskimo Pie, a chocolate-covered bar of vanilla ice cream, was the first ice cream novelty. Its history appears on the Eskimo Pie box:
Genuine Eskimo Pie . . . One day
Copyright © 1992 by the President and Fellows of Harvard College. Harvard Business School case 293-084.
In early 1991, Reynolds Metals, the makers of Aluminum Foil and other aluminum products, decided to sell its holding of Eskimo Pie, a marketer of branded frozen novelties. Reynolds had few interests outside its aluminum and packaging business, and the Eskimo Pie Corporation, with roughly $47 million in sales, accounted for less than 1% of Reynolds revenues. Reynolds planned to use the proceeds from the sale of Eskimo Pie to fund investments in its core aluminum business. Eskimo Pie was 84% owned by Reynolds Metals and 4% owned by the Reynolds Foundation. The remaining 12% of Eskimo Pie was held by various Reynolds family members and a small group of outside investors. Goldman Sachs, a New York investment-banking firm, was retained to assist with the sale of Eskimo Pie. Goldman estimated that the sale price of Eskimo Pie would be about 1.2 times 1990 sales or about $57 million. In 1990, Nestle Foods paid a comparable multiple for Drumstick, another ice cream novelty company. Goldman organized an auction for Eskimo Pie, and Nestle was the highest of six bidders, with a price of $61 million. Mr. David Clark, president of Eskimo Pie Corporation, recognized that the sale of Eskimo Pie to Nestle would mean the end of its independence. Nestle was likely to consolidate its ice cream novelty businesses by eliminating, Eskimo Pie's headquarters and management staff. Clark had struggled to find a way to keep the company independent since he first learned of the sale, but he had been unable to raise sufficient funds, to purchase Eskimo Pie in a Leveraged buyout (LBO), and the sale to Nestle seemed inevitable. Background Eskimo Pie, a chocolate-covered bar of vanilla ice cream, was the first ice cream novelty. Its history appears on the Eskimo Pie box:
Genuine Eskimo Pie . . . One day