Ben & Jerry’s Homemade: Value Creation and Governance

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Ben & Jerry’s Homemade: Value Creation and Governance

1.0 Decision faced by Morgan

Morgan has to consider the pending offers for the takeover.  He is in dilemma between maximizing the value for the shareholders and adopting the social commitment advocated by the co-founders. The co-founders of the Ben & Jerry Company, Ben Cohen and Jelly Greenfield are dedicated to ensuring that the company keep its social orientation and advocates for corporate independence while the Company’s CEO Perry Odak, is of the view that the shareholders of the Company can be better saved if it is sold out to the highest bidder. As such, the decision has to be made on whether to accept the takeover bid and move its business model to higher profit orientation or independently go after its social orientation.

The takeover offers that are presented to the company can be analyzed in terms of maintaining the company’s social commitment, the management control issue or the offer price. Dyer’s Grand offer to acquire Ben & Jerry is appealing to the management issue at will maintain the B & J management, encourage some social endeavors, but the offer of $31 per share will not derive the maximum value to shareholders. Unilever, offers of $ 36 cash, will increase the value of the company’s share which is in the interest of the shareholders but it is not in the interest of the cofounders and company’s objective on social orientation as it will restrict the company’s commitment to the social interests. The offer by the Meadowbrook for $32, and Chartwell which will acquire minority shareholding, will balance between the interest of the shareholders and that of the cofounders, but it does not offer optimal benefit to either of the two.

2.1 How Ben & Jerry Become Takeover Target

There has been increased competitive pressure and coupled with decline in financial performance, the board of directors of B & J resolved to consider acquisition offers.

2.2 B & J Mission Fulfillment

B & J mission includes three dimensions, that is, product, economic, and social objectives.

In the product mission the company aims at ensuring that it develops, distribute and sell Vermont made high quality ice cream. The company has been able to meet this mission by offering a variety of high quality and premium ice cream varieties under different brand names as illustrated in figure 1.0 below

Figure 1.0 J&B list of flaovours

The economic mission aims at attaining sound financial performance, maximizing shareholders value and ensuring that employees are motivated and rewarded for their effort. The company has attained the objective of meeting a sound and profitable growth. The company net sales increased gradually from $148.8 million to $237 million from 1994 to 1999 representing 59.8% growth in profit.  This result commensurate with the net income of the company which grew from a loss of $ 1.9 million in 1994 to a net profit of $ 8 million in 1999. However, the company does not maximize the shareholders wealth. As remarked by Richard McCaffrey, the average return on shareholders’ equity increase from 5% in 1997 to 9% in 1999 which does not commensurate with the sales of the company and thus translated into poor performance of the company in the stock market.

The company partly meets its mission of creating financial rewards and career opportunities for the employees. It meets this mission by being among the first company to offer employee health care benefits, there is a compressed payroll where the highest paid cannot earn more than five times that of the lowest paid………………….