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Ben And Jerry's

Essay by   •  March 17, 2011  •  1,032 Words (5 Pages)  •  1,429 Views

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Problem Statement

Ben and Jerry’s started their ice cream business in 1978 as a single parlor in Vermont but by 2000 had emerged as a socially conscious, super-premium ice-cream industry leader. Despite strong financial performance in the past, by 2000 the company’s market performance is struggling but their business model is attracting lucrative takeover offers. The Board of Directors is faced with the tough decision of developing a path forward that balances their responsibilities to the shareholders and is in keeping with the culture (mission, beliefs and values) of the organization. With takeover offers that significantly exceed the current stock price; the time has come to evaluate the merit of the individual offers and the value of continuing to operate as an independent company.

Problem Analysis

I)

Dreyer’s Grand is offering $31 per share, the lowest offer Ben and Jerry’s has received so far but the opportunity to continue to operate as a quasi-autonomous entity and maintain their management indicates that one of the pros of this option will be the potential to continue to operate with a social conscience. The main proposal suggests that the scope of the social interests will likely be limited to those that do not severely and negatively impact the bottom line. The culture developed by cofounders Ben and Jerry has in the past dictated that they sometimes sacrifice the bottom line for social interests but a takeover by Dreyer’s Grand will likely not accommodate that decision making process in it’s entirety. The probability is high that the departure from social interest will translate to higher profits short term and further increase shareholder value.

II)

Unilever has just raised their offer to $36 per share which makes this the most attractive offer. The proposal to maintain only select members of the management team, adjust the product offerings and restrict the social commitments means their will be a departure from the current mission. Ben and Jerry’s is currently incurring costs associated with their social interests as indicated by the average return on shareholders’ equity, an approach that limits these endeavors is positioned to deliver increase shareholder value via cost savings. A takeover in which Ben and Jerry’s is absorbed as part of an existing division will leave little room for the pursuit of the corporate mission set forth by the founders.

III)

Meadowbrook Lane has made an offer at a $32 share price but the current management team will be demolished and select project and interests will be maintained. Ben and Jerry’s would continue to operate as an independent company under the Meadowbrook umbrella but as a company with a social conscious mission they would struggle to be truly independent when their social endeavors are curtailed. Like the other three offers there is the potential to increase shareholder value with economically driven decisions versus social interests driven decisions.

IV)

Chartwell offers a premium on the $21 pre-offer announcement share price and allows Ben and Jerry’s to continue operating as an independent company under a new management team. This option with minority interest and a new management team means there may be opportunities to maintain the corporate mission and increase shareholder value through investments with the $30 to $50 million Chartwell is willing to invest in exchange for a management team of their choosing.

Recommendation

As a publicly traded company Ben and Jerry’s has a legal responsibility to maximize shareholder earnings in their decision making and it also the role of the Board of Director’s to ensure that no other interests including those of a social nature overshadow the choices that increase shareholder value. The social mission that shares the spotlight with product and economic goals in their three fold mission statement took a backseat to the commitment to

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