April 12, 2012 / 2:18 PM / 5 years ago

Reddy Ice to bid for Arctic Glacier

(Reuters) - Reddy Ice Holdings Inc RDDY.PK plans to file for bankruptcy and bid for Canadian rival Arctic Glacier Income Fund, as the packaged-ice maker looks to cut debt and beef up its business after years of battling government investigations, lawsuits and intensifying competition.

The industry has been struggling since 2007, when the U.S. government probed Reddy Ice, Arctic Glacier (AG_u.CD) and privately owned Home City Ice for an alleged conspiracy to eliminate smaller rivals and keep retail prices higher than market levels.

Reddy Ice and Arctic Glacier -- which filed for bankruptcy earlier this year -- racked up heavy debt battling lawsuits and government investigations.

Industry experts had long expected a merger of Arctic Glacier and Reddy, the largest manufacturer and distributor of packaged ice in the United States, as new competition from ice-vending machines also severely hurt the business.

Retailers, the industry’s main customers, also started making and selling their own ice, further eating into sales of packaged ice.

The two companies lost a combined $300 million over the past two years and their stock prices plummeted.

Dallas-based Reddy Ice was delisted from the New York Stock Exchange and Arctic Glacier was kicked off the Toronto Stock Exchange

Arctic Glacier, which is Canada’s largest and United States’ second biggest ice maker, started looking for buyers in February after filing for bankruptcy protection.

“I would say the most logical strategic buyer (of Arctic Glacier) is Reddy Ice,” said Mary Gilber, an analyst with Imperial Capital. “The two businesses are complementary from a geographic standpoint and (it) makes sense for both parties.”

In a filing with the U.S. Securities and Exchange Commission, Reddy Ice said hedge fund Centerbridge -- which is also one its largest lenders -- has indicated its interest in fully financing the Arctic acquisition.

In a separate statement, Arctic Glacier, which has a market value of $20.9 million, said it had received non-binding letters of intent from several interested parties to acquire or to invest in the company.

DIP FINANCING

Under the prepackaged bankruptcy plan, Centerbridge will forgive Reddy Ice’s debt in exchange for equity in the reorganized company.

Reddy Ice, which has about $516.6 million in current liabilities, sells ice in four to 50 pound bags primarily to supermarkets, mass merchants and convenience stores.

The company, whose largest customer is Wal-Mart Stores Inc (WMT.N) and its Sam’s Club unit, said it had secured $70 million in debtor-in-possession financing from Macquarie Bank Ltd.

It would have $50 million in exit financing once it emerges from bankruptcy, the company said.

All terms of the plan are subject to court approval.

“We expect to emerge from this restructuring as a much stronger company that is well positioned for investment in growth and enhanced profitability,” said Gilbert Cassagne, chief executive officer of Reddy Ice.

The company said it plans to file its Chapter 11 petition in the Northern District of Texas and is looking to emerge from bankruptcy within 45 days.

Reporting by Tanya Agrawal and A. Ananthalakshmi in Bangalore; Editing by Viraj Nair

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