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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