Reddy Ice Holdings filed for bankruptcy and said it was bidding 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 US government probed Reddy Ice, Arctic Glacier 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 US 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.
Under the prepackaged bankruptcy plan, Centerbridge will forgo Reddy Ice’s debt in exchange for equity in the reorganised company.