Eskimo Pie Case

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Eskimo Pie Case

• January 19, 2006

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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

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Updated Estimates in Valuation
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Sensitivity to Operating Ratios
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Eskimo Pie Cost of Capital
Estimated WACC using short-term and long-term
Treasuries
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Valuations under Varying Rates
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
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Valuation Using Comparables
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Eskimo Pie Share Price 1992-99
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Post-IPO Performance of Eskimo
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End of the Eskimo Pie Story
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 Pies 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.