You are responsible for passing in written replies to the undermentioned inquiries drawn from the Eskimo Pie Corporation instance. You can work with others on this assignment. but each person must manus in their ain set of replies.
1. Why do the directors of Eskimo Pie want to happen an option to the Nestle acquisition?
The Managers of Eskimo Pie want to happen an alternate to Nestle acquisition because they think the company would loss the independency. Nestle will consolidate its ice pick freshness concerns by extinguishing the company’s central office and direction staff. Besides Nestle may alter their concern attack. And the company has 71-year history of operating as a stand-alone company in Richmond. the staff would be improbable to retain their places after acquisition. So they want to salvage the local company and local occupation.
2. Why would Cuddle privation to get Eskimo Pie? Are at that place possible synergisms such as economic systems of graduated table? Is Eskimo Pie worth more to Nestle than it is deserving as a stand-alone company?
Nestle want to get Eskimo Pie because they have similar type of concerns. Besides Eskimo Pie granted sole territorial licences for the industry. distribution and sale of Eskimo Pie trade name merchandises. it will assist the Nestle’s concern.
There are possible synergisms. because they have similar merchandises. so they can unite both production installations. Nestle has a possible synergism in its Carnation and Drumstick units.
Eskimo Pie may be worth more to Nestle. because they can make and blend their merchandises.
3. What would be the capital construction ( i. e. . debt ratio ) of Eskimo Pie after its IPO if Reynolds Metals accepts the two-step dealing proposed by Wheat First?
Debt in twelvemonth terminal 1900 = 744K Assert = 29. 518K
For IPO. demand to borrow 2M for paying dividend
So entire debt = 2. 744M. Assert = 29. 518M + 2M = 31. 518M
For Total Assert. it need to pay out 14. 991M for div. . so Assert = ( 31. 518 – 14. 991 ) M = 16. 527M For IPO = $ 16. it can raise 53. 064M. so Entire Assert = ( 53. 064 + 16. 527 ) M = 69. 591M Debt ratio = 2. 744 / 69. 591 = 3. 943 %
For IPO = $ 14. it can raise 46. 431M. so Entire Assert = ( 46. 431 + 16. 527 ) M = 62. 958M Debt ratio = 2. 744 / 62. 958 = 4. 358 %