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:
[X] Preliminary proxy statement |_| Confidential, for use of the Commission
only (as permitted by Rule 14a-6(e)(2)
|_| Definitive proxy statement
|_| 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.
- --------------------------------------------------------------------------------
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- --------------------------------------------------------------------------------
(3) Per unit price of other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
|_| Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
|_| 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:
- --------------------------------------------------------------------------------
(2) Form, schedule or Registration Statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
- ----------
(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>
<PAGE>
The Yogen Fruz Proxy Challenge
================================================================================
Plan to Maximize Value for
Shareholders of Eskimo Pie
================================================================================
August 1999
-1-
<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:
We believe the current Board of Directors and Management of Eskimo Pie have
failed to maximize shareholder value, based on the general decline of the market
price of its stock from 1994 to the present.
It is our judgement that the stock will continue to decline, unless the current
Board and Management are voted out by the shareholders, and replaced by a slate
of Directors committed to a different strategy to maximize shareholder value.
The current Board of Directors and Management appear to be committed to
continuing a failed "growth strategy" that, since 1994, has produced - and will
go on producing - generally declining sales and profits.
We believe the interests of Eskimo Pie's shareholders will best be served by
voting in a Board of Directors committed to a strategy to maximize shareholder
value by selling Eskimo Pie's assets to buyers with synergies enabling such
buyers to pay full value for each asset.
With your proxy, Yogen Fruz believes its plan to maximize shareholder value by
selling Eskimo Pie's assets 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 Incorporated
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.
-4-
<PAGE>
Yogen Fruz Only Benefits If All Shareholders Benefit
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.
While Eskimo Pie is a current competitor of Yogen Fruz, Yogen Fruz believes that
a sale of Eskimo Pie's assets to other competitors would not benefit Yogen Fruz,
as Eskimo Pie's business would continue in the hands of purchasers, certain of
which Yogen Fruz believes have greater financial resources than Eskimo Pie with
which to market the brands they would acquire.
-5-
<PAGE>
Yogen Fruz World-Wide Incorporated
The management of Yogen Fruz, led by Richard E. Smith and Michael Serruya, in
addition to being engaged in the marketing, sale and distribution of products in
all segments of the ice cream and frozen novelty business (including those in
which Eskimo Pie markets its products), has considerable experience in the
purchase and sale of assets and companies in the frozen dessert industry.
In particular, Richard E. Smith has a track record of conducting large
transactions with major companies within the frozen dessert industry, including,
for example, the following:
o In 1980, Mr. Smith created Frusen Gladje Ice Cream, the first serious
competitor to Haagen-Dazs in the super-premium ice cream segment. In
1985, after building significant market share for the brand
nation-wide, Mr. Smith sold Frusen Gladje to Kraft/General Foods, Inc.
o In 1992, Mr. Smith sold the T&W Ice Cream brand to Dreyer's Grand Ice
Cream.
o In 1992, Mr. Smith oversaw the purchase by Steve's Homemade Ice Cream,
Inc. (the predecessor of Integrated Brands, Inc., a wholly owned
subsidiary of Yogen Fruz) of the General Mills Branded Frozen novelty
business from Weatherly Frozen Foods, Inc.
o In connection with this acquisition, Mr. Smith arranged for the
purchase and sale of Weatherly's ice cream plant inToledo, Ohio - one
of the nation's largest such facilities - to Frostbite Foods, Inc.
(now a division of Suiza Foods, Inc.).
The statements of opinion or belief set forth herein, except where supported by
written documentation, are judgements based upon the significant industry
experience of Yogen Fruz's management, with which other industry experts may
disagree.
-6-
<PAGE>
The Break-Up Strategy
We believe that recent events and the performance of Eskimo Pie and the price
for its stock since 1994 confirm our position that maximizing value to
shareholders cannot be achieved by:
o continuing to operate the company - its sales and profits are
declining and will continue to do so; or
o selling the company as a whole to any single buyer.
For the reasons discussed in detail below, we believe the way to get the highest
price for Eskimo Pie's stock is to break up Eskimo Pie's assets and sell them to
buyers with synergies enabling them to pay full value 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 are committing
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.
-7-
<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.
-8-
<PAGE>
The Break-Up Strategy
Prior to August 23, 1999, Eskimo Pie publicly disclosed that it had received no
bona fide offers to purchase the company as a whole as a result of its
activities in marketing the company to potential buyers. We believe the reason
for this was that potential buyers, including Yogen Fruz, were told by Eskimo
Pie's agents that its Board of Directors would not entertain any offer of less
than $13.00 per share.
No potential buyer for the whole company came forward at $13.00. In fact, prior
to August 23, 1999, all potential buyers declined to submit an offer. (On August
23, 1999, an unnamed investor group submitted a written proposal to purchase the
company for $10.125 per share.)
However, through direct discussions between Yogen Fruz and other interested
parties, including parties identified below as potential buyers, Yogen Fruz has
ascertained that many potential buyers continue to have strong interest in
acquiring one or more parts of Eskimo Pie (as opposed to buying the company as a
whole), 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.
-9-
<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: Prior to concluding its discussions with Eskimo Pie, 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.
-10-
<PAGE>
Valuation Of Eskimo Pie's Assets
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Asset Cash Flow* Value
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Eskimo Pie Brand 10,600,000 21,200,000 2x cash flow
- ----------------------------------------------------------------------------------------------
Welch's License 5,200,000 10,400,000 2x cash flow
- ----------------------------------------------------------------------------------------------
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, + $600K for equip.
- ----------------------------------------------------------------------------------------------
Weight Watchers License 2,400,000 8,500,000 3.5+x cash flow (YF offered this)
- ----------------------------------------------------------------------------------------------
Corporate Office Building NA 2,800,000 (Real Estate only)
- ----------------------------------------------------------------------------------------------
Nabisco Novelty License 670,000 1,340,000 2x cash flow
- ----------------------------------------------------------------------------------------------
Printed Wrap Factory NA 2,250,000 (Real Estate only)
- ----------------------------------------------------------------------------------------------
TOTAL 65,090,000 18.79 per share
- ---------------------------- ---------------- ------------------------------------------------
</TABLE>
* "Cash Flow" means Yogen Fruz's calculation 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, etc. 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. The foregoing valuations are based
on assumptions regarding sales and expenses which Yogen Fruz feels are
conservative in relation to historical financial data of Eskimo Pie, as
well as Yogen Fruz's knowledge of the marketplace for such products and
businesses, but which may not prove to be accurate. Summary Of Valuations
Of Eskimo Pie's Assets
-11-
<PAGE>
Summary Of Valuations Of Eskimo Pie's Assets
The foregoing 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 our estimates of the buyer's "cash
flow" from the purchased asset. We believe these valuations are conservative in
relation to recent transactions of a comparable nature in the same industry.
In the attached memorandum of Jay I. Borow of Kahn Consulting, Inc., an
independent accounting consultant retained by Yogen Fruz to perform market
research to evaluate the reasonableness of the valuations contained herein by
comparison to other similar recent transactions, Mr. Borow concluded that Yogen
Fruz's valuations are appropriate, if not conservative. Mr. Borow's evaluation
was limited to an interview by telephone with an executive of Suiza Foods, Inc.,
one of the two principal acquirers of dairy and frozen dessert companies in the
United States during the past two years, and one of the nation's largest
processors and distributors of milk and ice cream products. During this
interview, Suiza's executive communicated his knowledge of the range of
multiples of cashflow commonly paid by acquirers of businesses in the dairy and
frozen dessert industry. The use of this memorandum has been consented to by
Kahn Consulting in connection with this proxy solicitation.
-12-
<PAGE>
Summary Of Valuations Of Eskimo Pie's Assets
The foregoing 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 inquiries regarding the
marketability of these assets.
All of the foregoing valuations of Eskimo Pie's assets are made in good faith by
Yogen Fruz on the basis of our understanding and experience of industry norms
for such transactions. Other industry experts may agree or disagree with our
valuations.
However, Eskimo Pie's announcement on August 25, 1999 of its letter of intent to
sell its Ingredients/Flavors Business to Guernsey Bel, Incorporated
substantially confirms both our valuation of this asset and our identification
of Guernsey Bel as a potential buyer for this asset.
-13-
<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.
-14-
<PAGE>
The Potential Buyers For Eskimo Pie's Assets
The Break-Up Strategy is premised on our belief that the following potential
buyers possess the stated motivations for buying the respective parts of Eskimo
Pie, which may or may not prove to be correct.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Asset Buyer Motivating Reasons
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Eskimo Pie Brand Nestle Nestle needs a brand for
(or other, such as chocolate-coated ice cream bars, since
Suiza Foods) their Nestle Crunch brand only has bars
with crispy rice in the 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
License (or other, such as in buying back its license for fruit
Suiza Foods) juice bars, and has for the past 4
months been actively 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
Eskimo Pie (including These licensees would retain their
Dean Foods and existing production volumes and also
Shamrock Foods) increase their profit on each unit of
production. Welch's has previously
approved these licensees as
manufacturers under the Welch's brand
license.
- --------------------------------------------------------------------------------------------
</TABLE>
-15-
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Weight Watchers Nestle or For both Nestle and Unilever, Weight
License Unilever (or other, Watchers presents no conflict with their
such as Suiza Foods) existing brands. The Weight Watchers
or business would easily synergize with
Current Licensees of their current product lines and add
Eskimo Pie (including further critical mass to their marketing
Dean Foods and and promotions functions. Further, both
Shamrock Foods) companies own their own plants which
would generate additional profits from
production of the Weight Watchers
volume.
These licensees would retain their
existing production volumes and also
increase their profit on each unit of
production.
- --------------------------------------------------------------------------------------------
Nabisco Novelty Unilever (or other, Unilever already has Nabisco license for
License such as Suiza Foods) half gallons and pints. This
consolidation of all Nabisco brands in
the hands of a single licensee would be
equally attractive to Unilever and
Nabisco.
- --------------------------------------------------------------------------------------------
Ingredients/Flavors Gurnsey Bell, Star Kay This business is easily synergized by
Business White, David Michaels, any other existing supplier of similar
others. flavors and ingredients, including
the several named vendors.
- --------------------------------------------------------------------------------------------
Soft Serve Mix TCBY, YoCreme, Queensboro, Many manufacturers of soft serve mix
Business Suiza Foods, others. would desire this business for the
incremental gallonage it would bring
into their existing plant(s).
- --------------------------------------------------------------------------------------------
Corporate Office General Grubb & Ellis in Richmond, VA. has
Building advised us they have a buyer at $2.8
million.
- --------------------------------------------------------------------------------------------
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>
-16-
<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).
-17-
<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 is focused on marketing branded consumer products, and
appears to have no interest in vertical integration into packaging or
ingredient supply businesses. Moreover, due to the quantities of such
items purchased by Unilever, they are able to obtain pricing from
high-volume suppliers that is below the costs for such items
achievable at Eskimo Pie's wrap and flavor plants, based on our
understanding of their capacities.
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).
-18-
<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).
-19-
<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. We believe that the explanation for this is that Eskimo
Pie shipped quantities of packaging and other ingredients to its licensees that
exceeded the licensees' requirements needed to fill acutal customer orders.
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 thereby achieving better financial
results for Eskimo Pie than would otherwise be the case. (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".
-20-
<PAGE>
We Believe Eskimo Pie's Reported "Increases" Camouflage Actual Declines In Sales
And Profits
We believe that during the first and second quarters, Eskimo Pie 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, based
on the declines in actual purchases of Eskimo Pie's products by consumers
evidenced by the IRI/Infoscan data.
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
-21-
<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
-22
<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 -10.2%
Welch -16.3%
Nabisco SnackWell -40.5%
Nabisco Oreo Bar -39.2%
Source: IRI
-23
<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 they 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.
-24-
<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.
-25-
<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.
-26-
<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.
-27-
<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.
-28-
<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 acquisitioins 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. Suza 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 that
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 acquriing 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 approzimately 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
cash flow 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 appropriate or, perhaps, somewhat convervative. 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.
<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)
----------------------------------
(Signature)
----------------------------------
(Title)
----------------------------------
(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
