Ben and Jerry's Homade Case

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Ben & Jerry’s Homemade

Case #3

1/21/15

Recommendation

With Ben and Jerry’s Homemade currently sitting at $21 per share, all of the offers presented by Dreyer’s, Unilever, Meadowbrook Lane, and Chartwell represent a “substantial premium” to the company (See table below for summary of offers). If getting the most money out of an acquisition is the goal of the board, then the offer from Unilever at $36 is the clear winner. However, when taking all aspects into consideration, the best offer for Ben and Jerry’s is from Dreyer’s Grand. With over $1 billion in total sales, as well as their newly announced joint venture with Haagen-Dazs maker, Pillsbury, Dreyer’s is a dominant and successful ice cream brand. Another positive, and in line with the mission of Ben and Jerry’s, Dreyer’s will continue to encourage Ben and Jerry’s social endeavors. This standout, among other proposals from Dreyer’s, should be considered by the Ben and Jerry’s board of directors, in ultimately choosing the Dreyer’s acquisition as the best option on the table.

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Executive Summary

        Ben & Jerry’s has seen steady growth in both gross profit and net income from the beginning, however, their stock price has lagged behind other companies in the industry.  Some reasons for this are because of the very low margins they have as well as the 7.5% charitable donation they make before taxes. Ben and Jerry’s is only making a fraction of profit as net income, making $ 8 million of income on $91 million in profit. Ben and Jerry’s has massive costs to sales cutting into their profit and ultimately, their bottom line (Exhibit 1). They also suffer from low return on assets and only recently growing return on equity. This could also explain why Ben and Jerry’s is now positioned for an acquisition. They have continually grown sales, profit, and net income year over year, but due to their low margins and their 7.5% donation suppressing the stock price, they could be considered an undervalued company. Ben and Jerry’s also comes in below the adjusted S&P 500 value shown in exhibit 2 (not included).

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The offer that should be accepted is the proposal made by Dreyer’s Grand. Their offer of $31 gives Ben and Jerry’s a $10 per share premium and hits on all of the main points in the Ben & Jerry’s mission statement including the product, economic, and social stance. Ben and Jerry’s gets to keep it’s existing management team, meaning that the foundation of the company remains in place to maintain the culture of Ben and Jerry’s. Ben and Jerry’s also gets to operate as a semi-independent business, meaning that it can keep it’s Vermont roots and not have to worry about moving away from it’s hometown start. Finally, Dreyer’s is in support of some of the social missions of Ben and Jerry’s and even have their own Dreyer’s Foundation, meaning that important part of Ben and Jerry’s heritage can continue on.