-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, M/tgE5gvBr/lMGUXrbDjThhFTV2YqXs/AHeoEamYfwkdy56J3+IwsUPFB2D44CGo 90CSWNJ9qu+4RbKYL0yEFg== 0000891554-99-001717.txt : 19990827 0000891554-99-001717.hdr.sgml : 19990827 ACCESSION NUMBER: 0000891554-99-001717 CONFORMED SUBMISSION TYPE: PRRN14A PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19990826 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ESKIMO PIE CORP CENTRAL INDEX KEY: 0000787520 STANDARD INDUSTRIAL CLASSIFICATION: ICE CREAM & FROZEN DESSERTS [2024] IRS NUMBER: 540571720 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: PRRN14A SEC ACT: SEC FILE NUMBER: 000-19867 FILM NUMBER: 99700142 BUSINESS ADDRESS: STREET 1: 901 MOOREFIELD PARK DR CITY: RICHMOND STATE: VA ZIP: 23236 BUSINESS PHONE: 8045608400 MAIL ADDRESS: STREET 1: 901 MOOREFIELD PARK DR CITY: RICHMOND STATE: VA ZIP: 23236 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: YOGEN FRUZ WORLD WIDE INC CENTRAL INDEX KEY: 0001005531 STANDARD INDUSTRIAL CLASSIFICATION: ICE CREAM & FROZEN DESSERTS [2024] IRS NUMBER: 000000000 STATE OF INCORPORATION: A5 FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: PRRN14A BUSINESS ADDRESS: STREET 1: 8300 WOODBINE AVE 5TH FL STREET 2: MARKHAM ONTARIO CITY: CANADA L3R 9Y7 STATE: A6 BUSINESS PHONE: 5167379700 MAIL ADDRESS: STREET 1: 8300 WOODBINE AVENUE STREET 2: MARKHAM ONTARIO CITY: CANADA L3R 9Y7 STATE: A6 PRRN14A 1 AMENDMENT TO PRELIMINARY PROXY 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. 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). The Yogen Fruz Proxy Challenge ================================================================================ Plan to Maximize Value for Shareholders of Eskimo Pie ================================================================================ August 1999 -1- 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- 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- 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- 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- 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- 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- 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- 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- 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- Valuation Of Eskimo Pie's Assets
- ---------------------------------------------------------------------------------------------- Asset Cash Flow* Value - ---------------------------------------------------------------------------------------------- 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 - ---------------------------- ---------------- ------------------------------------------------
* "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- 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- 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- 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- 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.
- -------------------------------------------------------------------------------------------- Asset Buyer Motivating Reasons - -------------------------------------------------------------------------------------------- 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. - --------------------------------------------------------------------------------------------
-15-
- -------------------------------------------------------------------------------------------- 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. - --------------------------------------------------------------------------------------------
-16- 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- 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- 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- 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- 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- 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 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 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- 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- 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- 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- 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- [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 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 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. 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) 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 -----END PRIVACY-ENHANCED MESSAGE-----