Reddy Ice Feels the Heat
What's causing that creaking sound under the skates of Reddy Ice? Is it the lawsuits filed against it alleging that the company is involved in an "international conspiracy" to fix prices? Is it the state and federal government probes of similar accusations? Is it the buyout deal that fell apart in January? Is it the company's anemic earnings and equally anemic stock price? Is it the relentless pressure from an activist investor bent on changing the company's management and governance?
The nation's largest distributor of packaged ice is under siege, and so far it's less than clear when or whether it will be able to free itself from its problems, many of them self-imposed.
It does seem to be trying, though. On Thursday, Reddy announced that it had added two new board members, both nominated by the Shamrock Activist Value Fund, which has been putting pressure on the company to change its ways.
The new board members are Christopher S. Kiper, a vice president at Shamrock, and Michael H. Rauch of the law firm Fried Frank.
Shamrock, headed by Roy Disney (son of Walt), demanded that Reddy hire an outside firm to help it find a new CEO to replace Jimmy Weaver, who resigned in December. Reddy also announced on Thursday that it had relented to that demand.
Shamrock owns about 15.6 percent of Reddy.
In January, a tentative deal for GSO Capital Partners to buy Reddy out collapsed. Reddy initially had called the offer of $31.25 per share "grossly inadequate," then relented before the deal fell apart. On Friday, the stock was trading at $13.73.
Though its fourth-quarter earnings were disappointing, the company has forecast that it will beat expectations in 2008.
But that forecast came before the company announced that it is aware of at least 37 lawsuits against it that are seeking class-action status. Ridge Plaza, a convenience store in Milwaukee, filed suit last month in U.S. District Court in Minneapolis against the Dallas-based Reddy, Arctic Glacier International of West St. Paul, Minn., and Home City Ice of Cincinnati.
The suit alleges the three companies acted in an "international conspiracy" to fix prices and divide the country in to regions that each would control in selling cubed, crushed, block and dry ice â€" a $1.8 billion industry.
The "international" bit seems to be related to the fact that a Canadian firm owns Arctic Glacier. Ridge Plaza is seeking to consolidate other suits in a class action.
The Justice Department has confirmed that it is investigating possible anticompetitive practices in the ice industry, which is dominated by the three companies, but has given no details.
On March 31, the Florida Attorney General's office announced that it had launched its own investigation. Reddy says it is cooperating with the probes.