Ben & Jerry's stocks rises on talk of sale
By Ronald Rosenberg, Globe Staff, 12/03/99
Shares in Ben & Jerry's Homemade Inc. soared yesterday, after the quirky Vermont-based ice cream institution - maker of such flavors as Chunky Monkey and Cherry Garcia - said it had been approached by more than one suitor about selling the company.
Although it declined to name the bidders, the company said the offers are ''significantly above'' its closing price Wednesday, when the stock climbed nearly 3 points to 21. Yesterday Ben & Jerry's shares rose again, closing up 311/16 to 2411/16, after hitting 28 during the day. More than 922,700 shares exchanged hands, compared to a normal daily trading volume of 40,000 shares.
Several Wall Street analysts said the most likely buyers are Ice Cream Partners USA, a joint venture of Haagen-Dazs and Nestle, or Dreyers Grand Ice Cream. Both have distribution capabilities to deliver Ben & Jerry's exotic ice cream treats - including premium ice cream, low-fat ice cream, low-fat yogurt, and sorbet - to supermarket and convenience store shelves. Nearly 22 months ago, Dreyers was unsuccessful in an attempt to acquire Ben & Jerry's.
'Just whether they [Ice Cream Partners and Dreyers] can guarantee to continue to produce all the ice cream in Vermont, use only Vermont dairy products, and keep all production in the state are assurances big food companies have problems with,'' said Kim Galle, equity research analyst at Advest.
Any company that tries to buy the 21-year-old South Burlington, Vt., company will have to reckon with founders Ben Cohen and Jerry Greenfield, who together with Jeffrey Furman, company treasurer, control 75 percent of the Class B shares, enough to veto a takeover.
Yesterday the company, whose Waterbury ice cream factory is Vermont's most visited tourist atraction, said its board of directors was preparing a response, adding that its policy is to remain independent. But one Wall Street analyst maintains that the company may have to accept a good offer because of shareholder interests and mounting ice cream production and distribution costs.
Retaining Ben & Jerry's independent, warm and fuzzy culture and continuing to promote its liberal causes on behalf of the environment, the arts, and children, including its support of the world's rainforests, is becoming more difficult amid rising ice cream production and distribution costs and increasing competition in the crowded premium ice cream market.
Despite those challenges, the company's revenues continue to climb. For the first nine months of 1999, sales rose 12.4 percent, to $185.4 million, while earnings soared 47 percent, to $7.9 million or $1.05 per share. The company's stock, however, had lost 19 percent of its value during the same nine months, while other food companies have watched their shares soar.
''This is capitalism vs. tie-dyed, but this time I think capitalism may prevail,'' said Jeffrey Kanter, an analyst with Prudential Securities, who rates the company a hold.
''If I am a shareholder in the company, where the stock has not done much except when there is a chance of a buyout, I will have missed the entire bull market of the 1990s,'' Kanter added. ''This is a company with one of the best brand names, whose founders wanted to build a company with a structure that provides pretax charitable contributions. But in so doing they have created a corporate culture at the expense of shareholder wealth. If they don't do this deal or whatever, shareholders could bring legal retribution against them.''
Still, the road to buying Ben & Jerry's is far from certain. Under Vermont law, the company's board of directors must consider the nonfinancial effects of an acquisition on employees and the local community, along with financial factors. And that, said Kanter, could pose problems for potential buyers.
This story ran on page D01 of the Boston Globe on 12/03/99.