SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant
Filed by a party other than the registrant |X|
Check the appropriate box:
[_] Preliminary proxy statement |_| Confidential, for use of the Commission
only (as permitted by Rule 14a-6(e)(2)
|_| Definitive proxy statement
|X| Definitive additional materials
|_| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
ESKIMO PIE CORPORATION
(Name of Registrant as Specified in Its Charter)
YOGEN FRUZ WORLD-WIDE INCORPORATED
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of filing fee (Check the appropriate box):
|X| No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price of other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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|_| Fee paid previously with preliminary materials.
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|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or Registration Statement no.:
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(3) Filing party:
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(4) Date filed:
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(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
YOGEN FRUZ WORLD-WIDE INCORPORATED
-------------------
Eskimo Pie Corporation
1999 Annual Meeting of Shareholders
Scheduled for September 8, 1999
-------------------
TO ALL SHAREHOLDERS OF ESKIMO PIE CORPORATION:
The enclosed additional Proxy materials and proxy card are being furnished
to you, as a holder of the Common Stock of Eskimo Pie Corporation ("Eskimo"), in
connection with the solicitation of proxies by Yogen Fruz World-Wide
Incorporated ("Yogen") for use in connection with the 1999 Annual Meeting of
Eskimo's Shareholders ("Shareholders"), which is scheduled to be held on
September 8, 1999 at 10:00 A.M. in the Auditorium of the Crestar Center, 919
East Main Street, Richmond, VA and at adjournments or postponements thereof (the
"Annual Meeting"). YOU SHOULD HAVE ALREADY RECEIVED YOGEN'S PROXY STATEMENT AND
BLUE PROXY CARD IN THE MAIL. THE ENCLOSED MATERIALS EXPLAIN WHY YOU SHOULD VOTE
IN FAVOR OF THE YOGEN PROPOSALS ON THE ENCLOSED BLUE PROXY CARD.
YOUR PROXY IS IMPORTANT. IF YOU HAVE ALREADY SUBMITTED A PROXY FOR THE
ANNUAL MEETING, ON ESKIMO'S WHITE PROXY CARD YOU MAY CHANGE YOUR VOTE TO A VOTE
FOR THE YOGEN FRUZ WORLDWIDE INCORPORATED PROPOSALS BY MARKING, SIGNING, DATING
AND RETURNING THE ENCLOSED BLUE PROXY CARD FOR THE ANNUAL MEETING, WHICH MUST BE
DATED AFTER ANY PROXY YOU MAY HAVE SUBMITTED TO ESKIMO. ONLY YOUR LATEST DATED
PROXY FOR THE ANNUAL MEETING WILL COUNT AT SUCH MEETING. NO MATTER HOW MANY OR
HOW FEW SHARES YOU OWN, PLEASE VOTE FOR THE YOGEN PROPOSALS BY SO MARKING,
SIGNING, DATING AND MAILING THE ENCLOSED BLUE PROXY CARD IN THE ENCLOSED
POSTAGE-PAID ENVELOPE PROMPTLY.
You CANNOT use Management's WHITE proxy card to vote FOR the Yogen
proposals set forth on the enclosed BLUE PROXY CARD. IF YOU HAVE NOT ALREADY
MAILED THE WHITE PROXY CARD, PLEASE DISCARD THE WHITE PROXY CARD AND MAIL THE
ENCLOSED BLUE PROXY CARD. IF YOU HAVE MAILED US A BLUE PROXY CARD AND HAVE NOT
SUBSEQUENTLY MAILED A WHITE PROXY CARD TO ESKIMO, YOU NEED NOT TAKE ANY FURTHER
ACTION.
Proxies in the accompanying BLUE proxy card, duly executed and mailed, and
which are not revoked, will be voted at the Annual Meeting.
The address and telephone number of Yogen, to which all BLUE proxy cards
should be remitted prior to the Annual Meeting are:
TENZER GREENBLATT LLP
405 Lexington Avenue, 23rd Floor
New York, New York 10174
Tel: (212) 885-5000
Attn: Benjamin Raphan, Esq.
If you have any questions or have any difficulty granting proxies, you are
invited to call Michael Serruya at Yogen at 905-479-8762 (Extension 225).
<PAGE>
Yogen Fruz Proxy Challenge
===============================
Plan to Maximize Value for
Shareholders of Eskimo Pie
===============================
August 1999
<PAGE>
The Yogen Fruz Proxy Challenge
Objective: To promptly bring the highest price to shareholders for their
stock.
Strategy: To break up Eskimo Pie Corporation and achieve the maximum value
for its assets by selling each asset to its natural buyer.
Tactics: To solicit proxies from fellow shareholders of Eskimo Pie
Corporation to replace the current Board of Directors and
Management of Eskimo Pie with a slate of nominees committed to
one thing only: maximizing value for all of the shareholders of
Eskimo Pie.
-2-
<PAGE>
Rationale:
The current Board of Directors and Management of Eskimo Pie have failed to
maximize shareholder value.
It is clear to us that they are committed above all to:
o maintaining the status quo
o keeping their jobs
o continuing a failed "growth strategy" that has produced - and will go
on producing - only declining sales and profits
o doing nothing to increase the price of Eskimo Pie shares
Unless the current Board and Management are voted out by the shareholders, we
believe the stock will further decline steeply.
With your proxy, Yogen Fruz believe its plan to maximize shareholder should
result in the return of at least $15.00 per share to you and every other
shareholder of Eskimo Pie.
-3-
<PAGE>
Yogen Fruz World-Wide, Inc.
Yogen Fruz is largest shareholder of Eskimo Pie Corporation.
o 587,700 shares
o 17% of the issued and outstanding shares
As the largest shareholder, we have the most to gain from any plan that
successfully maximizes shareholder value - and the most to lose by not pursuing
such a plan.
o Yogen Fruz has approximately $7.5 million invested in Eskimo Pie
o Our average price is almost $13.00 per share
Yogen Fruz profits from its investment only by bringing each shareholder $13.00
or more per share - and we believe we know how to do it.
Yogen Fruz will not buy Eskimo Pie Corporation or any of its assets. Yogen Fruz
is committed to being the seller - not the buyer - of Eskimo Pie, to succeed in
bringing the highest price for Eskimo Pie stock, in its own best interest and
that of every other shareholder.
Yogen Fruz represents to you, and all other shareholders of Eskimo Pie, that
Yogen Fruz and its Nominees will accept no fees or compensation of any kind for
performing any of the services or duties in any way connected with carrying out
its plan to maximize value for shareholders.
-4-
<PAGE>
The Break-Up Strategy
The current Board of Directors and Management of Eskimo Pie have proven that
maximizing value to shareholders cannot be achieved by:
o operating the company - its sales and profits are declining and will
continue to do so
o selling the company as a whole to any single buyer
The way to get the highest price for Eskimo Pie's stock is to break up the
assets and sell them to the natural buyers for each asset.
As the largest shareholder, Yogen Fruz gains more from selling all of the parts
to others than from buying any of the parts itself. That's why we have committed
to you that we are not a buyer.
Our interest is the same as all other shareholders: to get the highest price for
our shares of Eskimo Pie.
-5-
<PAGE>
The Break-Up Strategy
Eskimo Pie cannot be sold "as a whole" to any single buyer for the highest price
because Eskimo Pie is a hodge-podge collection of small dissimilar parts.
o Each potential buyer is motivated to acquire one or several parts of
Eskimo Pie - those parts that synergize effectively with the potential
buyer's existing business.
o However, for each potential buyer, certain parts of Eskimo Pie are
undesirable and do not synergize effectively or at all. The buyer will
not pay full value for these parts.
o If forced to pay for the whole company, the buyer will discount its
offer based on the parts it does not want or doesn't plan on keeping.
o Selling each part to a buyer that only wants that part gets full value
- even a premium over the full value.
-6-
<PAGE>
The Break-Up Strategy
No bona fide offers were received to purchase Eskimo Pie Corporation as a whole
because the Board of Directors communicated that no offer of less than $13.00
per share would be entertained.
No potential buyer for the whole company came forward at $13.00. In fact, all
potential buyers declined to submit an offer.
However, many potential buyers had strong interest in acquiring one or more
parts of Eskimo Pie, and would pay full value for those parts.
The current Board of Directors and Management of Eskimo Pie chose to ignore this
fact - thus preventing a sale of Eskimo Pie.
Yogen Fruz's Proxy Challenge recognizes this fact as the key to obtaining full
value for Eskimo Pie's shareholders.
-7-
<PAGE>
The Break-Up Strategy
The Yogen Fruz Proxy Challenge recognizes the fact that buyers will pay more for
each specific asset but less in total for the whole company. The Break-Up
Strategy will bring by far the highest total price to Eskimo Pie shareholders
for just this reason.
In many cases, a buyer will pay a premium over the full value of the asset it
wishes to acquire, when it is purchasing only the assets it truly wants, and is
not being forced into a larger deal only for the purpose of acquiring assets it
does not even want or intend to keep.
Example: Yogen Fruz offered to buy just the Weight Watchers License for
$8.5 million. The Weight Watchers business is approximately $8
million at wholesale, so our offer was more than dollar for
dollar on sales. Still, the current Board of Directors of Eskimo
Pie rejected this offer.
However, if Eskimo Pie as a whole were sold one dollar for each dollar of sales
- - which it cannot be for the reasons already given - the price would be around
$65 million, or $18.77 per share. Yogen Fruz believes all of the parts of Eskimo
Pie can be sold at full value if sold separately to the right buyers.
-8-
<PAGE>
Valuation Of Each Part Of Eskimo Pie
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Asset Cash Flow Value
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Eskimo Pie Brand 10,600,000 21,200,000 2x cash flow
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Welch's License 5,200,000 10,400,000 2x cash flow
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Ingredients/Flavors Business 1,000,000 10,000,000 10x cash flow (with Real Estate)
- ------------------------------------------------------------------------------------------------------------------------------------
Soft Serve Mix Business 1,450,000 8,600,000 5.5x cash flow, plus $600,000 for
equipment
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Weight Watchers License 2,400,000 8,500,000 3.5+x cash flow (YF offered this)
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Corporate Office Building NA 2,800,000 (Real Estate only)
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Nabisco Novelty License 670,000 1,340,000 2x cash flow
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Printed Wrap Factory NA 2,250,000 (Real Estate only)
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TOTAL 65,090,000 18.79 per share
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</TABLE>
The valuations for Eskimo Pie's "National Brands" (Eskimo Pie, Welch's, Weight
Watchers, Nabisco and Eskimo Pie's soft serve mix business) are based on
multiples ranging from 2x to 5.5x of the buyer's estimated synergized "cash
flow" from the purchased asset. We believe these multiples are conservative in
relation to recent transactions of a comparable nature in the same industry (see
attached report of Kahn Consulting, Inc.).
Valuations for Eskimo Pie's Ingredients/Flavors Business and 2 Real Estate
properties (corporate office building in Richmond, VA and Packaging factory in
Bloomfield, NJ) are based on Yogen Fruz's own investigation.
"Cash Flow" means Yogen Fruz's estimate of net pretax profits before allocation
of general corporate overhead. Cash flow is after deducting all direct expense
incurred on, or allocated against, each asset, including marketing expense,
brokerage and market research expense. Potential buyers already have a full
corporate overhead. Accordingly, "cash flow" represents Yogen Fruz's estimate of
the net contribution to profitability for the Buyer from the acquired asset.
-9-
<PAGE>
The Break-Up Strategy
Based on the gross values for each of the parts of Eskimo Pie, we estimate that
the net yield per share of Eskimo Pie stock should be at least $15.00.
To accomplish this, our plan is to proceed in 2 steps:
Step 1 Sell all of the parts of Eskimo Pie, except the Eskimo Pie Brand.
Step 2 Sell the Eskimo Pie Corporation (with Eskimo Pie Brand and the
cash proceeds from Step 1) to the buyer for the Eskimo Pie Brand.
Since the Eskimo Pie Brand is the most valuable asset and has the
lowest book value (due to being fully amortized over so many
years), this will result in the lowest tax liability on the
transaction.
The sum of the buyer's consideration for the cash from Step 1 and the Eskimo Pie
Brand should be at least $15.00, representing full value for Eskimo Pie
shareholders.
Since Yogen Fruz's average price on its stock is approximately $13.00, Yogen
Fruz will only profit on its investment by returning a price higher than $13.00
for all shareholders.
-10-
<PAGE>
The Potential Buyers For Eskimo Pie's Assets
The Break-Up Strategy is premised on a clear knowledge of the potential buyers
for each of the parts of Eskimo Pie.
<TABLE>
<CAPTION>
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Asset Buyer Motivating Reasons
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Eskimo Pie Nestle Nestle needs a brand for chocolate-coated ice cream bars, since
Brand (or other, such as their Nestle Crunch brand only has bars with crispy rice in the
Suiza Foods) chocolate coating. Eskimo Pie would fill a huge gap in their
novelty portfolio. Also, as a chocolate company that produces its
own chocolate coatings, Nestle would supply itself with chocolate
coating for Eskimo Pie bars, providing a major additional
synergy.
- -----------------------------------------------------------------------------------------------------------------
Welch's Welch's Welch's has declared its firm interest in buying back its license
License (or other, such as for fruit juice bars, and has for the past 4 months been actively
Suiza Foods) exploring potential co-packing arrangements with manufacturers.
As with chocolate coating for Nestle, Welch's would itself supply
fruit juice concentrates directly to the manufacturer, providing
a major synergy that would result in Welch's making more profit
on this line than Eskimo Pie does today.
or
Current Licensees of These licensees would retain their existing production volumes
Eskimo Pie (including and also increase their profit on each unit of production.
Dean Foods and Welch's has previously approved these licensees as manufacturers
Shamrock Foods) under the Welch's brand license.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
-11-
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Asset Buyer Motivating Reasons
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Weight Nestle or For both Nestle and Unilever, Weight Watchers presents no
Watchers Unilever (or other, conflict with their existing brands. The Weight Watchers business
License such as Suiza Foods) would easily synergize with their current product lines and add
or further critical mass to their marketing and promotions
Current Licensees of functions. Further, both companies own their own plants which
Eskimo Pie (including would generate additional profits from production of the Weight
Dean Foods and Watchers volume.
Shamrock Foods)
These licensees would retain their existing production volumes
and also increase their profit on each unit of production.
- -----------------------------------------------------------------------------------------------------------------
Nabisco Unilever (or other, Unilever already has Nabisco license for half gallons and pints.
Novelty such as Suiza Foods) This consolidation of all Nabisco brands in the hands of a single
License licensee would be equally attractive to Unilever and Nabisco.
- -----------------------------------------------------------------------------------------------------------------
Ingredients/ Gurnsey Bell, Star Kay This business is easily synergized by any other existing supplier
Flavors White, David Michaels, of similar flavors and ingredients, including the several named
Business others. vendors.
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Soft Serve TCBY, YoCreme, Many manufacturers of soft serve mix would desire this business
Mix Business Queensboro, Suiza for the incremental gallonage it would bring into their existing
Foods, others. plant(s).
- -----------------------------------------------------------------------------------------------------------------
Corporate General Grubb & Ellis in Richmond, VA. has advised us they have a buyer
Office at $2.8 million.
Building
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Wrap Factory General Prime industrial location just off of New Jersey Turnpike/I-95
(major north/south commercial artery for Northeast U.S.). Visible
from Turnpike.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
-12-
<PAGE>
Nestle Would Not Buy The Whole Company
o Nestle has the license for Dole, which is the nation's #1 fruit juice
bar brand.
o We believe Nestle would not give up or jeopardize its license for the
Dole Brand by buying the Welch's license.
o Nestle used to be in the ingredient and packaging business, but sold
this business to NDS. We believe Nestle would not re-enter this
industry by acquiring Eskimo Pie's ingredients, flavors and packaging
businesses.
o Nestle is not in soft serve mix business, and Eskimo Pie's mix
business is too small to warrant their getting into this category.
o Nestle would not be likely to acquire the Nabisco novelty license,
since this would involve it with a brand also marketed by Nestle's
arch competitor Unilever, who holds the Nabisco half gallon and pint
license.
Nestle would not be interested in buying these parts, or in paying full value
for them only to have to take the time and energy to spin them off. As a result,
Nestle would not pay fair value to acquire all of Eskimo Pie only to end up with
the parts it would want (Eskimo Pie Brand and Weight Watchers License).
-13-
<PAGE>
Unilever Would Not Buy The Whole Company
o Unilever has the license for the Minute Maid brand from the Coca-Cola
Company, and is contractually prevented from doing business under the
Welch's license with which it conflicts.
o One of Unilever's core brands world wide is Good Humor, the #1 brand
for chocolate-coated stick novelties. The Eskimo Pie brand - the
company's most valuable asset - exactly duplicates the Good Humor
equity and product line, including Eskimo Pie's critical "sugar free"
lines.
o Unilever buys printed wraps from outside vendors more cheaply than
Eskimo Pie's plant produces them. In any event, Unilever is focused on
marketing brands, and appears to have no interest in vertical
integration into packaging or ingredient supply businesses.
o Unilever is not in the soft serve mix business, and to it this would
be more of a commodity based business, as opposed to the brand driven
consumer products it regards as its desired terrain.
Unilever would not be interested in buying these parts, or in paying full value
for them only to have to take the time and energy to spin them off. Unilever
would not pay fair value to acquire all of Eskimo Pie only to end up with the
parts it would want (Weight Watchers or Nabisco Novelty License).
-14-
<PAGE>
Other Buyers Would Not Buy The Whole Company
o Welch's only wants their own Welch's brand business back. It is
unlikely their investment banker (BT Capital) would finance the
purchase of whole company.
o Eskimo Pie's current licensees, similarly, would likely be unable to
finance the purchase price for the whole company. However, they could
finance the purchase of a part, such as Welch's and/or Weight
Watchers.
o Ingredients/Flavors companies, and soft serve mix companies, lack the
experience, resources and desire to market brands to supermarkets,
with the high capital requirements for advertising, promoting and
slotting. That's why they would not buy the Eskimo Pie Brand or any of
the Licensed Brands.
Each potential buyer would bid aggressively for the parts it wants (just as
Yogen Fruz offered top dollar ($8.5 million) for Weight Watchers. The
shareholders deserve a Board that will actively solicit and close such sales.
However, the current Board of Directors and Management - who rejected Yogen
Fruz's top dollar offer for Weight Watchers - continue to operate as they have
been doing, pursuing their failed growth plan (i.e. "investment spending" to
build their brands).
-15-
<PAGE>
Eskimo Pie's recently reported "increases" in sales and profits are contradicted
by market data showing declines in consumer purchases of Eskimo Pie
Corporation's products.
o Eskimo Pie's revenues consist primarily of sales of ingredients, wraps
and packaging to its licensees, who convert these into finished
product and sell it to retailers.
o For any given period, Eskimo Pie can artificially affect its sales and
profits by shipping extraordinary amounts of packaging to the
licensees, and booking the sales. (Packaging requires no
refrigeration, so is inexpensive for licensees to store excess
amounts. And we believe that Eskimo Pie gives them extra time to pay
for these extra shipments.)
o Over-loading the licensees with excess packaging creates the illusion
of growth, but only temporarily. Actual sales to consumers are
declining. Inevitably, the licensees will drastically reduce their
purchases from Eskimo Pie in subsequent periods to balance off the
prior "over shipments".
o We believe that's what Eskimo Pie has done in the first and second
quarters: loaded up its licensees with packaging they did not need to
post temporary "increases" in sales and profits that will inevitably
be reversed in subsequent periods.
-16-
<PAGE>
We Believe Eskimo Pie's Reported "Increases" Camouflage Actual Declines In Sales
And Profits
Eskimo Pie's current Board of Directors and Management stand to benefit from the
fact that by the time Eskimo Pie would have to announce these decreases, it will
be after the September 8 shareholders meeting - and too late to affect the
shareholders' vote on the Yogen Fruz proposals. (Third Quarter results will not
be announced before the meeting.)
We believe the only accurate picture of the true direction of sales and profits
is what consumers are buying off the shelf, as revealed by scan data from the
retailers' cash registers. IRI/Infoscan data proves that sales are way down
versus last year on Eskimo Pie's core brands during the key sales period for the
entire year:
o down in unit sales for the entire 2nd Quarter
o even further down in unit sales for the month of June
-17-
<PAGE>
Eskimo Pie Corporation
Unit Sales Performance Decline
13 Weeks Ending June 27, 1999
vs YR Ago
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Eskimo Pie -6.3%
Welch -7.9%
Nabisco SnackWell -45.3%
Nabisco Oreo Bar -22.9%
Source: IRI
-18-
<PAGE>
Eskimo Pie Corporation
Unit Sales Performance Decline
4 Weeks Ending June 20, 1999
vs YR Ago
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Eskimo Pie -10.2%
Welch -16.3%
Nabisco SnackWell -40.5%
Nabisco Oreo Bar -39.2%
Source: IRI
-19-
<PAGE>
We believe Eskimo Pie encouraged licensees to fill their warehouses with
packaging on the basis that it was necessary to show growth in sales and profits
to defeat Yogen Fruz's Proxy Challenge. We believe they were given to understand
that if Yogen Fruz won, they could be hurt in 2 ways:
Threat #1 Yogen Fruz, upon the change in control, would cancel their
license agreements and convert the business to its own customary
"cost plus" way of doing business, possibly with its own
manufacturers.
This would mean a total loss of the business for the licensees,
or - even if the held on to some of the volume - less profit per
unit on everything they manufactured.
Threat #2 Yogen Fruz would sell the Eskimo Pie Brand and the License Brands
to companies like Unilever, Nestle and Suiza, which have their
own factories. This would definitely mean a loss of all of the
volume.
Faced with these threats, we believe the licensees over-purchased packaging to
allow Eskimo Pie to show an artificial growth in sales and profits.
-20-
<PAGE>
Shareholders Must Liquidate Eskimo Pie
We believe that "artificial" results for the first and second quarters mask a
downward trend in sales and profits on Eskimo Pie's core brands that will only
continue to worsen in the future, causing continued erosion of shareholder
value.
o Eskimo Pie lacks critical mass to compete with novelty giants
Unilever, Nestle and Suiza, and its sales and profits will decline due
to its inability to promote its products as profitably as competitors
Unilever, Nestle and Suiza.
o Unilever, Nestle and Suiza have vastly more product's in distribution
than Eskimo Pie. When they buy a co-op ad with a supermarket chain to
promote their novelty items, they can amortize the cost of the ad
across their entire line of offerings. Thus, they can pay more for the
ad and, as a result, have bid up the cost of buying the ad for all
manufacturers.
o Eskimo Pie, with far fewer products, pays far more for its ad on a
"per item" basis. In fact, Eskimo is increasingly unable to make a
return on the cost of the ad, and so must promote its products less
frequently and at less attractive retail price points.
o As a result, sales to the consumer have suffered, and will continue to
worsen as the competitive advantage of Unilever, Nestle and Suiza
continues to grow.
-21-
<PAGE>
Eskimo Pie's commitment to licensing vs. "cost plus" co-packing hurts Eskimo Pie
competitively.
o Unilever, Nestle and Suiza manufacture their own products themselves.
Their profit on the manufacturing side - instead of going to a
licensee - helps contribute to the profitability of their companies
and to their ability to advertise and promote their brands to the
consumer.
o Thus, Eskimo Pie's brands are more valuable to Unilever, Nestle and
Suiza than they are to Eskimo Pie, because Unilever, Nestle and Suiza
would make much greater profits than Eskimo Pie on these brands, by
manufacturing the products for themselves in their own plants, and by
promoting them in full-line ads with all of their other items,
o The same is also true for Welch's if it bought back its own brand. By
co-packing on a "cost plus" basis, Welch's will have more money to
promote and market their brand. And they would carry no additional
overhead, but instead synergize the fruit juice bar business with the
rest of the Welch's business.
o The same is also true of Eskimo Pie's licensees: if they bought the
Welch's brand, they would increase their profit on what they already
produce, with out any increase in overhead.
-22-
<PAGE>
Yogen Fruz Is Committed To One Thing: The Most Money For Its Stock In Eskimo
Pie.
Eskimo Pie Corporation, we believe, is doomed to suffer ever-deepening declines
in sales and profits, due to its competitive disadvantages, and the resultant
downward trend in consumer purchases of its products. The current Board of
Directors and Management do not discuss this fact in what appears to be an
attempt to save their jobs. This comes at the direct cost to shareholders in
terms of lost shareholder value.
As The Largest Shareholder, Yogen Fruz's Only Interest Is In Getting The Assets
Of Eskimo Pie Sold For The Highest Prices.
Yogen Fruz and its Nominees for the Board of Directors guarantee that they will
accept no fees, salaries or other compensation for their services in managing
Eskimo Pie through the process of selling of its assets for the benefit of its
shareholders.
A Temporary Manager will serve at Yogen Fruz's expense until the process is
successfully completed.
-23-
<PAGE>
Yogen Fruz Only Gains If You Gain
Unless the liquidation proceeds exceed $13.00 per share, Yogen Fruz cannot earn
any profit on our $7.5 million investment in the stock of Eskimo Pie. That is
your guarantee that Yogen Fruz is in your corner in this fight to obtain full
value for Eskimo Pie's shareholders.
By pledging that it will not purchase any assets of Eskimo Pie and by taking on
the burden of administering this process - at Yogen Fruz's sole expense - Yogen
Fruz guarantees that its interests are squarely aligned with yours, as
shareholders of Eskimo Pie.
We firmly believe that shareholders will receive a return of at least $15.00 per
share as a result of the break-up process described above. We would not seek
your proxy to undertake this process unless we believed this result was
achievable.
Please use the BLUE proxy card to vote FOR the Yogen Fruz Proposals, and discard
the WHITE proxy card, to maximize the value of your investment in Eskimo Pie.
If you have already voted using the WHITE proxy card, you can CHANGE your vote
to vote FOR the Yogen Fruz Proposals by signing, dating and returning the BLUE
proxy card, which will then count as your vote.
-24-
<PAGE>
[LETTERHEAD OF KAHN CONSULTING, INC.]
PRIVATE AND CONFIDENTIAL
MEMORANDUM
To: David Stein
From: Jay Borow
Date: August 16, 1999
Re: Eskimo Pie Corp. Acquisition Issues
- --------------------------------------------------------------------------------
You have retained my firm to assist you in certain market research as it
pertains to the valuation of the component businesses of Eskimo Pie Corp.
("Eskimo"). In this regard, we have, along with you and Richard Smith, discussed
with Delton Parks concepts of acquisitions in the ice cream and related novelty
business. Our discussion with Mr. Parks occurred today by teleconference.
Delton Parks is the President of Country Fresh Dairies, a major subsidiary of
Suiza Foods Corp. ("Suiza"), the Chief Operating Officer of the midwest division
of Suiza, and a member of the Board of Directors of Suiza. In his capacity as an
officer of Suiza, Mr. Parks has been involved in numerous acquisitions. In fact,
the 1998 10-K of Suiza disclosed that the company was involved in 13
acquisitions in 1998 and 3 during the first 3 months of 1999 in the dairy
industry. Even though not all of these transactions were in the ice cream and
frozen novelty business, it
<PAGE>
would indicate that Mr. Parks does indeed have significant experience in
acquisitions. (The other company that is making significant acquisitions in this
industry is Dean Foods Company of Franklin Park, Illinois. The 1998 10-K of Dean
Foods states that they have acquired 20 companies over the last 5 years).
Mr. Parks explained the following information:
i. Suiza had been interested in acquiring Eskimo. Suiza chose not to make
this acquisition primarily because Mr. Parks felt that acquiring the
entire company - meaning all of Eskimo, including all of its different
businesses and real estate would entail more effort than he and Suiza
were prepared to devote to such a relatively small enterprise.
ii. Mr. Parks still has an interest in acquiring certain components of
Eskimo. Acquiring certain businesses of Eskimo is more attractive for
Suiza than acquiring the entire business (i.e. all of the businesses
of Eskimo).
iii. Generally, acquisitions for businesses in this industry with no hard
assets and no branded names have been selling for approximately 4
times cashflow.
iv. Generally, acquisitions of on-going "branded" businesses in this
industry have been selling for anywhere from 4 to 9 times cashflow and
most recently in the 6 to 8 times cashflow range. This multiple
contemplates the inclusion of hard assets and, of course, excludes any
debt as components of the purchase.
v. In computing cashflow in these instances, Mr. Parks indicated that the
cashflow amounts that are used, are basically the target's cashflow.
Conclusion:
Based on this conversation with Mr. Parks, it appears that the valuation
multiples that you have utilized in valuing certain components of the Eskimo
business are appropiate or, perhaps, somewhat conservative. Your components and
multiples are as follows:
2
<PAGE>
i. Eskimo Pie Brand 2 times cashflow
ii. Welch's License 2 times cashflow
iii. Soft Serve Mix 5.5 times cashflow
iv. Weight Watchers License 3.5 times cashflow
v. Nabisco Novelty License 2 times cashflow
It would appear from our conversation with Mr. Parks that a 4 to 8 times
multiple for each of these components is appropriate for valuation purposes
particularly since many of the Eskimo business components consist of well known
national brand names.
3
<PAGE>
BLUE PROXY
ESKIMO PIE CORPORATION
ANNUAL MEETING OF SHAREHOLDERS -- SEPTEMBER 8, 1999
THIS PROXY IS SOLICITED BY YOGEN FRUZ WORLD WIDE INCORPORATED
IN OPPOSITION TO THE ESKIMO PIE CORPORATION BOARD OF DIRECTORS
AND FOR THE AMENDMENT OF ESKIMO PIE'S BY-LAWS
The undersigned shareholder of Eskimo Pie Corporation ("Eskimo") hereby
appoints Michael Serruya, Richard Smith and David Stein, each of them, proxies,
with full power of substitution, in each of them, to vote all shares of Common
Stock, par value $1.00 per share, of Eskimo that the undersigned is entitled to
vote if personally present at the 1999 Annual Meeting of Shareholders of Eskimo
to be held on September 8, 1998, and at any adjournments or postponements
thereof as indicated below and in the discretion of the proxies, to vote upon
such other business as may properly come before the meeting, and any adjournment
or postponement thereof. The undersigned hereby revokes any previous proxies
with respect to matters covered by this Proxy.
YOGEN FRUZ WORLDWIDE INCORPORATED RECOMMENDS A VOTE FOR PROPOSALS 1 THROUGH
3.
PROPOSAL 1. ELECTION OF YOGEN SLATE OF DIRECTORS to elect the following
individuals as Directors of Eskimo until the 2000 Annual Meeting
of Shareholders: Michael Serruya, Aaron Serruya, David Prussky,
David M. Smith, David J. Stein, Benjamin Raphan and Edward
Obadiah.
[_] FOR ALL NOMINEES LISTED ABOVE (except as marked to the contrary below)
[_] WITHHOLD AUTHORITY TO VOTE FOR THE NOMINEES LISTED ABOVE
(To withhold authority to vote for any individual nominee listed above,
write that nominee's name in the space provided below)
<PAGE>
PROPOSAL 2. By Law Amendment with respect to Rights Agreement to amend
Eskimo's by-laws to require THE Eskimo Board of Directors to
carry out a resolution authorizing partial or complete redemption
or amendment to the Eskimo Rights Agreement, if such resolution
is authorized and approved by affirmative vote of shareholders
owning or having the right to vote at least a majority of the
capital stock of Eskimo.
[_] FOR [_] AGAINST [_] ABSTAIN
PROPOSAL 3. By Law Amendment with respect to Special Meetings to amend
Eskimo's by-laws to allow the shareholders owning or having the
right to vote at least 5% of the outstanding capital stock of
Eskimo to call a special meeting of shareholders.
[_] FOR [_] AGAINST [_] ABSTAIN
THIS PROXY, WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN ABOVE. IF NO
INSTRUCTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 THROUGH 3 AND
IN THE DISCRETION OF THE PROXIES, TO VOTE UPON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE MEETING, AND ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
----------------------------------
(Date)
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(Signature)
----------------------------------
(Title)
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(Signature, if held jointly)
When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee, guardian, corporate officer or
partner, please give full title as such. If a corporation, please sign in
corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by an authorized person. This Proxy votes all
shares held in all capacities.
PLEASE MARK, SIGN, DATE AND MAIL PROMPTLY IN THE ENCLOSED ENVELOPE
