Eskimo Pie Case Study Essay Example

operations would inevitably lead to significant management and employee personnel downsizing (at least one stakeholder is negatively affected).

2) IPO The IPO analysis per case study was undervalued based on our projections. Through our comparable analysis (Exhibit 3) we have determined the proceeds that would be received by Reynolds is $77,065,153. Our calculation is based on using the average multiple of PE, MV/BV, MV/S to arrive at our price per share of $23. 14 (Exhibit 4). The IPO process would be sensitive to market sentiment but even with these changes, our analysis provided a window of 50% downside protection which would be above the proceeds in a private sale transaction. The IPO process is also dependent upon Wheat First’s ability to execute roadshows and attract enough investors. The “Green Shoe” clause would allow Reynolds the ability to gain further upside if the public market receives the IPO well. Our analysis is based on the option of 10-15% more shares which will secure additional proceeds for Reynolds.

Decision: After evaluating each alternative we ultimately believe that Reynolds should begin the IPO process. If IPO market conditions can remain hot long enough for the IPO filing to get through we believe Reynolds Metals will receive the highest influx of cash for their current ownership stake in Eskimo Pie Corporation.

Though significant risk exists in terms of generating a favorable offer price per share, we believe based on our analysis, the market will value Eskimo Pie to be near $23. 14 per share, well above the previous projections made by Wheat First Investment Bank. The IPO process will provide much higher aggregate proceeds for Reynolds above a private sale to Nestle

or continuing current operations.

Plan of Action: Reynolds Metals ought to begin firm negotiations with Wheat First Investment Bank in order to complete this deal as quickly as possible. Reynolds should also work diligently to ensure all filings are done in a timely manner to capture a favorable market and yield the highest economic value for their ownership stake. The timing of the process is extremely important to the success of the IPO in order to maximize the benefits. Exhibit 1 Exhibit 2 (Projected Income Statement) Exhibit 3 (IPO Analysis) Exhibit 4 (PE=Price/Earnings, MV=Market Value, BV=Book Value, S=Sales)[ 1 ]. Reynolds would secure 84% of the $61M, totaling: $51. 24M