As an advisor to Reynolds, I would point out that in terms of operations, there is nothing special about Eskimo Pie, but the company still receives the benefit of being the first ice cream novelty on the scene and the brand value that flows from that fact. Going solo may grant the firm complete control over than brand, but operationally it does not grant the firm national license and corresponding economies of scale. The Nestle offer is based upon the opportunity for that company to earn synergies with respect the offering -- combining the strength of the Eskimo Pie brand with the global marketing clout of Nestle. As a standalone company, Eskimo Pie still holds significant value, but not nearly as much values as if it was a standalone operation.

As a standalone operation, Eskimo Pie earns...

What this indicates is that based strictly on the company's earnings, the company is worth significantly less than what Nestle is offering. Using 8% as the discount rate, the firm's estimated future cash flows are worth nowhere near the $61 million that Nestle is offering -- they may be worth half that at best.
For the existing shareholder, it is better to accept Nestle's offer. This offer attaches the best value to the company. The Nestle offer is higher than the company's book value, and it is higher than the expected value of the company at present. Indeed, the Nestle offer is nearly double the reasonable value of the company. This is because unlike an independent…