Background

Eskimo Pies is a novelty ice cream company with approximately $47 million in
sales. It is currently owned by aluminum product manufacturer Reynolds Metals, who are
looking to sell the company to focus on its core aluminum businesses. This provides an
attractive investment opportunity to a firm that can benefit from synergies in operations.
Valuation
Assuming 35% corporate tax rate, book value of equity

1. What is your estimate of the value of Eskimo Pie Corporation as a

stand alone company?
2. Why would Nestle want to acquire Eskimo Pie? Are there potential
synergies? Is Eskimo Pie worth more to Nestle than it is worth as a
stand alone company?
3. As an advisor to Reynolds, would you recommend the sale to Nestle
or the proposed initial public offering?