Reddy Ice Holdings, Inc. (NYSE: FRZ) appears to be in great shape after its planned merger with GSO Capital Partners fell through thanks to troubles in the credit market. The packaged ice provider is now set to receive nearly $25 million in breakup fees from the hedge fund while continuing to explore strategic alternatives. This turn of events is music to the ears of shareholders - many of whom saw the acquisition price as grossly inadequate. Shareholders are now hoping that the company will find another potential suitor or other ways to unlock value in the company’s stock. So, what does all of this mean for investors?

The smart money is picking up more and more shares. Shamrock Activist Value Fund was one of the original investors to push for a sale, but failed to be impressed by GSO Caiptal Partner’s buyout price. Now that the bid has fallen through, the firm recently increased its stake to roughly 2.6 million shares, representing a 12.1 percent stake in the company, from 1.8 million shares, or an 8.3 percent stake in the company. Already, this kind of large buying has propelled shares beyond the original buyout price and into new territory ahead of future developments. It looks like many hedge funds and institutional investors see value in the stock.

Reddy Ice itself has also posted some nice financial results. The company said its preliminary results show it will slightly exceed the upper range of its previous forecast for 2007 revenues of between $332 million and $338 million. Net income is set to come in slightly below the lower end of its forecast of between $11.3 million and $15.4 million. The results show continued revenue growth, but with some pressure on margins thanks to the difficult economic environment. However, the $25 million breakup fee should provide a one-time boost to shares while management explores other options to unlock value for shareholders.

In the end, Reddy Ice said that it would continue to explore transactions with GSO and review other alternatives available to the company. The stock continues to trade near its 52-week low while being accumulated by activist hedge funds ahead of another review of strategic alternatives - a recipe for success in many books. Combined, these factors make FRZ a stock that is definitely worth watching over the next few months!

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