Reddy Ice Holding Corporation
(NDAQ: FRZ) directors may be in for a fight after a large activist
hedge fund has nominated its own slate of directors while quickly
ramping up its stake in the company. The Shamrock Activist Value Fund
announced its slate of candidates for the company’s board of director
earlier this month while increasing its stake to more than 14.38
percent in recent days. Many investors are hoping that the activist
hedge fund will take action to unlock value in the company, whose
shares are trading well off of their 52-week highs and well below their
intrinsic valuation. So, is Reddy Ice a stock worth watching for your
portfolio given this activist involvement?
Reddy Ice announced at the end of January that its proposed
acquisition by GSO Capital Partners had been cancelled due to the
ongoing problems in the credit markets. Shamrock had called the $31.25
per share buyout price “grossly inadequate” and suggested a potential
conflict of interest existing between the company executives, some
board members, and the hedge fund. The company said it will continue to
explore transactions with GSO and review other alternatives available
to the company. It is unclear whether Shamrock’s attempt to takeover
the board is an attempt to prevent a takeover or an attempt to sell the
company to a higher bidder. However, shares continue to rise ahead of
the anticipated proxy fight.
Reddy Ice is set to release its financial results on Wednesday,
February 27th along with a conference call to discuss results. Many
investors are expecting to see slightly lower results for the fourth
quarter after the company guided lower three times since July of last
year. Most recent estimates peg the full year revenues to be between
$335 and $345 million and net income to be between $14.8 and $19.7
million or $0.66 to $0.90 per share. Adjusted EBITDA is seen to be
between $85 and $90 million. Meanwhile, many analysts were expecting
revenues of $351 million with net profit of $15.9 million and EBITDA of
$86 million. It will be interesting to see how its actual results
compare given the difficult market conditions.
In the end, this is all great news for Reddy Ice shareholders who
stand nothing to lose and everything to gain from Shamrock’s
involvement. If the hedge fund is able to install its own directors and
conduct a real auction of the company, shareholders go see a
substantially larger upside to this company. Obviously, there is value
to be realized from this point given GSO’s valuation of $1.1 billion
while the company is currently priced at just $541 million with no
material change. Combined, these factors make FRZ a stock worth
watching closely over the next few months!
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