Shamrock Activist Value Fund, owner of 6.4% of Reddy Ice Holdings, Inc. (NYSE: FRZ), has released an open letter to shareholders arguing against a proposed buyout at $31.25 a share by GSO Capital Partners.

Reddy Ice is a manufacturer and distributor of packaged ice products in the U.S., most prominently bagged ice found in supermarkets and convenience stores.

The letter highlights what Shamrock claims are numerous "deficiencies" in the sale, most prominently a conflict of interest with company management:

"Shareholders should look closely at the motivations of management in pursuing this transaction. As recently disclosed by the Company, members of senior management may acquire an equity interest in the Company following the acquisition. Why would management seek to purchase an equity interest in the Company post-acquisition if, as disclosed by the Company, management and the Board of Directors, truly believes “that the $31.25 per share merger consideration would result in greater value to our shareholders than pursuing our current business plan?” If that statement is more than just hollow rhetoric, then it is hard for us to understand why management would invest in the transaction at $31.25."

Instead, Shamrock proposes a buyback of 15% of outstanding shares by the company at $33 a share, satisfying those that want to liquidate their position as well as shareholders who "believe in the company's future" and want to retain a stake in it.

The letter reminds shareholders that Reddy Ice has yet to realize the benefits of more than 20 acquisitions it has made in the last two years. Also, company management recently stated that "unusual" weather has negatively impacted recent financial results. In other words, the company is poised for growth and and better returns, making this the worst time to sell and the best time to buy - which is exactly why management is attempting to convince shareholders to sell so they can share in the upside of a purchase.

Finally, Shamrock says its own discounted cash flow analysis of the company values it at $42 to $44 a share, significantly more than the $29.60 it is currently trading for and the $31.25 GSO is offering. And this definitely makes FRZ a stock worth watching!