The Scoop on Ben & Jerry's Sellout
The official announcement this morning that the conglomerate Unilever would be purchasing Ben & Jerry's outright for $43.60 a share touted many of the things you would expect the famously responsible ice cream company to tout: Employees would keep their jobs, the firm's "social mission" would remain intact, and so on. But the factor that is presumably most important was listed first: "With this transaction, shareholders will be rewarded."
It's easy to imagine that, if we could transport this deal back in time 10 years, it would have been frankly labeled a sellout, in the most pejorative sense of the term. Just a few days ago becoming a part of Unilever seemed like a distasteful option, as company co-founder Ben Cohen attempted to cobble together a counter-deal involving "socially responsible" investors. So, there was a glimmer of a battle for some abstract higher principle, but it faded quickly.
What's interesting is not only that pretty much no one is going to accuse Ben & Jerry's of selling out, but why that is so. What has changed in the last 10 years to make such an accusation so unlikely to stick? The critical change is the evolution of the idea of "shareholder rights" as something that now has an almost populist connotation. After all, a huge percentage of the kinds of people who care about "social responsibility" now own stocks. And while "social responsibility" is kind of a murky term, "shareholder rights" not only sounds virtuous, but is very easy to understand: You, the shareholder, have a right to see your shares go up.
If you're a fan of Ben & Jerry's ice cream--which is a perfectly reasonable position--you might assume on the old buy-what-you-know theory that its stock has been a great thing to own. After all, "super premium" ice cream seems like an ideal category in which to have been an innovator during these boom times. But that was not the case, and as recently as December the company's stock was languishing below $20 a share before the rumors of a potential sale surfaced.
The Motley Fool, styled as the commonsense voice of the common shareholder, recently complained that Ben & Jerry's has "underperformed the market's historical average during the greatest bull run in the stock market history. That's unacceptable any way you slice it." As for the company's famous program of donating 7.5 percent of pretax profits to charity, that may be "commendable," but "the program lost its luster when the company failed to deliver reasonable results to its long-term investors." A Prudential research note on the deal cited by TheStreet.com sounds a note of disgust, as well, taking the populist tack of complaining that Perry Oak, the Ben & Jerry's chief executive since 1997, holds options that will be worth about $13 million at Unilever's takeover price--"which is incredible considering that [Ben & Jerry's] lost all sorts of share under his tenure." Still, the analyst concedes the silver lining: "For shareholders, this is more than a fair price." Power to the people, right on.
Anyway, given the rather steep premium that Unilever seems to have paid, it will be interesting to see how the relationship pans out--whether Ben & Jerry's remains an independent unit, whether it will continue to give profits away, whether Ben and Jerry remain involved. The official word is that all of this is part of the deal, but of course it is trickier to pull these things off over time, particularly if shareholders' rights are trampled in the bargain.
Just to make sure I wasn't missing any outrage over the Unilever announcement--after all, Ben & Jerry's scoop shops encouraged anti-conglomerate independence rallies in January--I checked out www.savebenandjerrys.com. The site doesn't seem to have been updated lately, but there is an interesting note there about an apparently failed plan to encourage ice cream fans to "save this wonderful organization" by buying up enough shares to keep the company out of evil corporate hands. The site notes that even if you bought shares and this popular revolt failed, well, at least you'd pocket the takeover premium. As the site puts it, citizen shareholder: "This is a win-win situation for you."