Eskimo Pie (Stand Alone Value)

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Stand-Alone Value
There are many valuation methods that could be used to evaluate this company. Finding a method that valuates the stand-alone value is difficult. The stand-alone value should be dependent upon the firm’s own assets and projected future income. We decided to evaluate this company based upon two methods: The Discounted Cash Flow Method and the Comparable Companies Method.
Discounted Cash Flow Method takes the forecast free cash flows during forecasted horizon. Then we estimate the cost of capital (weighted average cost of capital) and estimate continuing value (value after forecast horizon). The future value is discounted to the present value. We than add back cash ($13 Million) and non-current assets and deduct total
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Like all acquired synergies, only time after the acquisition will provide if the synergy value was benefit to the company (Unknown, 2002).
Who will benefit
Reynolds Metals will benefit more financially by not selling to Nestle Foods. Both estimated stand-alone values are less then the purchase price, but Reynolds Metals will have to pay significantly high capital gains by selling to Nestle. Capital gain taxes will take a large sum of the cash.
On the other hand, Nestle will benefit from the purchase because it will get a tax break from borrowing money to the purchase company and as mention above, buying Eskimo Pie will lower overhead cost by eliminating Eskimo Pie management and Nestle utilizing existing facilities and eliminating sublicensing costs creating greater cash flows.
Based on the projections, Eskimo Pie Company is expecting sales growth estimated at 15%. It is also undervalued compared to its industry average. Doing the IPO will create higher market value of the company and generate enough cash to finance the IPO. In addition, the IPO will benefit senior management, employees, and the community. If Reynolds Metals is concerned about receiving cash, they will receive upfront of 84% of $15 Million dollars of dividends and the value of the stock would increase because it will be valued based on the market. Wheat First will benefit as a

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