B&J Case Study
Henry Morgan, member of G’s board of directors should accept Milliner’s takeover offer at $36 a share.
In spite of possessing a recognizable brand name, 45% of the super-premium ice cream market and successful new product urologist, the returns should be better. Over the past six fiscal years B&J’s ROE has been on average a terrible 5%. During the same time frame the yield on thirty-year treasury bonds has been on average 6%.
This signifies that investing in the treasury bonds would’ve have created more value Nile undertaking considerably less risk than investing in B&J. Not only is Milliner’s bid of $36 a share represent a substantial premium over B proffer-announcement share price of $21 , they’re a company with a proven track record of creating value for their share holders.
Milliner is the world’s largest ice cream producer in the world Nile carrying a market capitalization of $18 billion. The company has demonstrated effective management in place through their ROE average of 38. % over the previous three fiscal years. They have also earned an average of $88. 3 million in revenue over the previous five years with a net income average of $6.
3 million during the same time frame. They’re taking into consideration the current B&J management so they Nil be keeping a select few of them. They also realize that a major reason as to why 3&J are not creating as much value to their shareholders is due to their generous philanthropy, so they will restrict it to an extent.
When evaluating the other propositions the most attractive alternative to Milliner is Dryer’s Grand Ice Cream Holdings Inc. Not only is Dryer’s bid of $31 represent a substantial premium over 3&J proffer-announcement share price of $21 they’re takeover method is friendly. Rhea plan on maintaining B’s management team while also maintaining their philanthropic ways to an extent.
They have demonstrated they have the blue print to maintain their success. They have total sales of over $1 billion and the company stock
IS being traded at a total capitalization of $450 million. Dryer’s also demonstrate incredible growth potential as proven by their 47. 2 PIE ratio, which exceeds the PIE ratios of every comparable firm. Dryer’s P/B ratio is also much larger than comparable firms again demonstrating the potential growth Dryer’s is expected to experience. The promising expectations of Dryer’s are too risky to move forward Ninth.
In the previous three years they have had an average debt/equity ratio of 1. 91, an average ROE of -13. %, and have been showing mixed financial stability in terms net income and share holder’s equity. The potential growth does not Justify the risks. Milliner’s current position as #1 ice cream producer in the world may hurt their expectations since the ranking doesn’t leave much for room for added growth.
The Increasing price of resources such as milk and cream may prove harmful to future net income but those aren’t factors neither the company nor its competitors can control. It’s a burden that the whole industry will have to endure.
