Quaker Vs Snapple Case Summary

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In the spring of 1994, Quaker Oats Company (“Quaker”) and Snapple Beverage Corp. (“Snapple”) negotiated about the common stock of Snapple. The chief executive officer of Quaker, William D. Smithburg told Bloomberg Business News that Quaker and Snapple had interest to merge the two companies and commenced a due diligence investigation. The deal was consummated in November of that year. Quaker Oats bought Snapple common stock for $1.7 billion. The Snapple as plaintiffs content that the Quaker (as defendants) had violated rules that listed in the issue section. Before the announcement of the Quaker – Snapple merge, Quaker had stated that its debt ratio was favorable. In their complaint, plaintiffs stated that defendants must have known about the stated debt to capitalization ratio…show more content…
According to plaintiffs, defendants already knew about these rules. While in the past, Quaker said that the earnings growth should be seven percent, in fact, the stock fell about ten percent and certain stakeholders were sued. The other claimed that the earnings projects were inflated. Plaintiffs stated a couple of complaints too, including at ¶22, ¶23, ¶24, and ¶32. ¶22 was about the increasing leverage guideline and share repurchase program. ¶23 was about the increased short-term and long-term debt (total debt) and the total debt to total capitalization ratio as of September 30, 1993. ¶24 talked about the total debt to total capitalization ratio was 68.8% on a book-value basis, in line with the guideline in the upper 60% range. Lastly, ¶35 mentioned about Quaker’s stock fell $7.375 per share, approximately 10% of the stock’s value.

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