Tags: Reddy Ice Holdings (FTZ)
Noon supplement … January 29, 2008 — Comment on Companies & Events in the News
Reddy Ice Holdings (FRZ: $23.03: MV: $ 506 million) was a hot topic last summer. A hedge fund had agreed to buy FRZ, the country’s largest producer of packaged ice, at $31.25 per share. Morgan Stanley was to provide the hedge fund with $700 million of financing, however, its interest in doing the deal evaporated once the sub-prime mortgage crisis hit.
Naturally, the stock melted on news of the broken deal, down 30% initially, but it may have overshot its correction. Even before the buy-out was announced, the stock never sold for much less than $25 a share. Plus, there are some market observers (such as www.thestreet.com) who hint that another deal may take this buy-out-waiting-to-happen out of the deep freezer.
Just looking at the fundamentals, it is apparent why Reddy would be attractive as a buy-out candidate. It generates more than $80 million a year in EBITDA and Net Income is $10 million. Market value is less than 1.5 times annual sales. Long term debt of $347 million is high, but easily serviced, based on cash flow. Presumably, Morgan Stanley’s objective was to clean up the balance sheet, re-tool the management, then return the improved company into the public arena.
More on Reddy Ice —
• Largest manufacturer and distributor of packed ice in the USA
• 2,000 year-round employees
• Distributes thru 82,000 locations in 31 states
Even without a buy-out re-surfacing, there appears little downside in the stock at the moment. On the positive side, any news about a renewed takeover can be expected to give this stock a boost. Two private companies also fuel speculation about FRZ being a consolidator — Home City Ice (Cincinnati-based, $80 million in annual sales); Arctic Glacier (Winnepeg, $180 million in sales). Note that FRZ’s $345 million in annual sales are more than these two private companies combined. Plenty of banking business to attract Wall Street’s attention.