Yogen Fruz Snags Eskimo Pie
By Gerry Clark
After roughly 18 months' worth of failed repeated takeover overtures, Yogen Fruz World-Wide Inc. has finally pulled it off—the Toronto based-concern is acquiring frozen novelty marketer Eskimo Pie Corp.
The roughly $36 million deal has Yogen Fruz (which recently renamed itself CoolBrands International Corp.) paying $10.25 per share for Richmond, VA-based Eskimo, which will become a wholly-owned subsidiary of the Canadian company.
"In a rapidly consolidating industry, the acquisition of Eskimo Pie Corp. more than doubles the size of our consumer products business in the U.S., and significantly increases our competitive strength in the market for frozen desserts," Yogen Fruz President/Co-CEO David Stein said Thursday in announcing the merger.
Eskimo Pie officials, who previously had reacted to Yogen's earlier hostile takeover attempts with acrimony and accusations, said this week the move represents a positive step.
"This proposal brings to a successful conclusion what has been an exhaustive search for a transaction that is in the best interests of our shareholders," Eskimo Pie Corp. President/CEO David Kewer said.
"Eskimo Pie Corp. is a small company in a category dominated by two global giants, Unilever and Nestle," Kewer remarked. "Access to additional financial and strategic resources is important to the success of the Eskimo Pie brand name, and our partner brands in the frozen novelty category."
Defense drainage
Eskimo spent 1999 on the defensive while Yogen Fruz relentlessly pursued the company beginning with its initial overture in November 1998.
The resistance drained Eskimo's coffers. Its FY 1999 financial results reflected special charges of more than $1.2 million linked to the corporation's strategic alternative analysis, $191,000 worth of restructuring charges, and $394,000 in proxy contest expenses. Combined, these expenses (after taxes) pulled the corporation's income down by $1.14 million with its consolidated net income resting at $836,000. (See related article).
Last week, Eskimo announced its first-quarter 2000 sales increased 2% vs. the same period a year ago and that its net income jumped a whopping 200%, excluding special charges, which brought the increase down to 93%. Still, the results were the most upbeat the corporation has experienced in four years. (See related article).
Eskimo has been seeking a buyer since last September when, pressured by Yogen Fruz (which, with a 17% stake, is Eskimo's No. 1 shareholder), corporate leaders put the company on the block. Members of Eskimo Pie's board of directors had pledged to resign their positions if a deal wasn't secured by April's end.
Other Eskimo shareholders include Boston-based Peak Management Inc. (10.7%) and Phoenix, AZ-based dairy processor Shamrock Foods (14.9%), which boosted its interest in the company just days before last fall's annual meeting when the decision was made to put the pressured company on the block.
Officials from Shamrock, which is an Eskimo licensee, were unavailable for comment on how this week's deal would affect their interest in the corporation.
Performance slump
Yogen Fruz might be aggressive in its efforts to expand its portfolio, but that doesn't mean everything is in order on the home front.
The company this week reported it suffered a nearly $25.8 million net loss for its second quarter ended Feb. 29 vs. a $905,000 net loss for the same period one year ago. Revenues were roughly $15.6 million vs. nearly $18.2 million during last year's first quarter.
"Our promotional strategy for fiscal 2000 called for fewer promotions during the first and second quarters, which correspond to our ‘off-season,' and more promotions during the third and fourth quarters, which is our peak selling period, when returns on promotional investments should be greater," Stein said.
"Sales for the second quarter reflect this decision, and we expect that our strategy will result in revenue and earnings gains during the third and fourth quarters that will more than offset declines during the first two quarters," he said. "Strong initial sales data for the third quarter are consistent with this expectation."
Yogen Fruz's brand roster includes I Can't Believe It's Yogurt, Swensen's Ice Cream, Golden Swirl, Bresler's Ice Cream and Java Coast Fine Coffees. It also markets, sells and distributes Tropicana frozen fruit juice bars and frozen dessert products.
Eskimo Pie Corp. credits itself as the creator of the frozen novelty industry in 1921 with the invention of its namesake chocolate-covered ice cream bar on a stick. The company currently markets a slew of novelties, ice cream and sorbet products using several brand names, including Real Fruit, Welch's, SnackWell's and Oreo.