U.S. Securities and Exchange Commission
Washington, D.C. 20549
NOTICE OF EXEMPT SOLICITATION
Submitted pursuant to Rule 14a-6(g)
| 1. | Name of the Registrant: |
REDDY ICE HOLDINGS, INC.
| 2. | Name of person relying on exemption: |
Stanley P. Gold, Michael J. McConnell, Christopher Kiper, Shamrock Activist Value Fund, L.P. (“SAVF”), Shamrock Activist Value Fund II, L.P. (“SAVF II”), Shamrock Activist Value Fund III, L.P. (“SAVF III” and, collectively with SAVF II and SAVF, “Shamrock Activist Value Fund”), Shamrock Activist Value Fund GP, L.L.C., Shamrock Partners Activist Value Fund, L.L.C. and Shamrock Capital Advisors, Inc. (“SCA”).
| 3. | Address of person relying on exemption: |
4444 Lakeside Drive, 2nd Floor, Burbank, California 91505
| 4. | Written materials. Attach written materials required to be submitted pursuant to Rule 14a6(g)(1): |
On August 8, 2007, Shamrock Capital Advisors, Inc., the investment manager for the Shamrock Activist Value Fund, publicly released the following open letter to the Company’s shareholders from Michael J. McConnell, on behalf of the Shamrock Activist Value Fund, a copy of which has also been posted on the website of Shamrock.com:
Dear Fellow Shareholder:
Shamrock Activist Value Fund is one of the largest shareholders of Reddy Ice Holdings, Inc. (“Reddy” or the “Company”), owning 1,401,542 shares or approximately 6.4% of the outstanding shares. As we indicated in our first letter dated July 16, 2007, we believe Reddy is worth substantially more than the $31.25 per share offered by affiliates of GSO Capital Partners (“GSO”). We also believe the preliminary proxy statement filed on July 23, 2007 highlights critical deficiencies in the sale process. Accordingly, we urge you to vote against this inadequate offer.
The Wrong Transaction
Shareholders should ask themselves: Does a potential conflict of interest exist in the proposed transaction?
Shareholders should look closely at the motivations of management in pursuing this transaction. As recently disclosed by the Company, members of senior management may acquire an equity interest in the Company following the acquisition. Why would management seek to purchase an equity interest in the Company post-acquisition if, as disclosed by the Company, management and the Board of Directors, truly believes “that the $31.25 per share merger consideration would result in greater value to our shareholders than pursuing our current business plan?” If that statement is more than just hollow rhetoric, then it is hard for us to understand why management would invest in the transaction at $31.25.
A further indication of the conflict of interest is that senior management and certain Board members stand to reap millions from the accelerated vesting of their restricted share awards (“RSAs”) if the transaction is consummated. As recently described by the Company, a portion of these RSAs held by management and directors had not vested as of June 30, 2007 due to the failure of the Company to meet performance targets. Of course, if the proposed transaction is consummated, all unvested RSAs would automatically vest. That would entitle these holders to receive the merger consideration for all of their RSAs, even though performance targets have not been achieved.
We find it curious that within less than one year following the initial public offering of Reddy and just days following its May 2006 secondary offering management was seeking strategic alternatives. It appears that management urgently wants to take Reddy private again. Who can blame them? They made millions of dollars during their prior stint when they were running Reddy as a private company. Further proof of these intentions is demonstrated by the fact that in considering its strategic options in the fall of 2006, no strategic buyers were considered. If the Board and management were truly committed to maximizing value for all shareholders, they would have considered strategic buyers who may have been willing to pay a much higher price as a result of potential synergies. Of course, management’s opportunity for significant equity participation would not have been attainable in a transaction with a strategic buyer!
In our view, the Board and Special Committee failed to exercise effective oversight of management’s actions and failed to provide proper leadership and direction. The failure of the Special Committee to pursue consideration of a “structured finance transaction,” because of a “lack of resources” rings hollow. Such a transaction could have been highly effective in restructuring the balance sheet to lower Reddy’s cost of capital, fund a share buyback or extraordinary dividend, or even provide the necessary financing to pursue a large acquisition. Why should shareholders be denied a potentially superior alternative due to the failure of the Special Committee to appropriately utilize both internal and external resources? The Board and its Special Committee is failing in its responsibilities to the shareholders.
We believe our proposal for a 15% stock buyback at $33 per share is a superior proposal for Reddy shareholders. Shareholders seeking increased liquidity could sell a portion of their shares in the buyback at a premium to the current proposal, while those that believe in the Company’s future, as we do, could continue to retain their investment.
The Wrong Time
Shareholders should ask themselves: Why sell now?
Reddy is a company poised for substantial growth. It has acquired 20 businesses since its initial public offering was completed in 2005, but it has yet to realize the full benefit from these transactions. The Company has recently stated that “unusual” weather has impacted second quarter results. If that is the case, why pursue a sale at this time, unless value maximization was not the Board’s primary objective. We do not understand why this Board is so eager to rush to the exit, without having conducted a full auction or attempting to fully maximize Reddy’s potential for its current shareholders. The result of this hurried process is clearly demonstrated by the Special Committee allowing GSO to lower its bid from $34 per share at the outset of negotiations down to $31.25. Short term or unusual events should not dictate the price that represents appropriate value for Reddy shareholders. We think the best years are ahead for Reddy and are disappointed that this view is not shared by management, or worse, that management has recognized that this is the best moment for them to acquire the Company, at the expense of current public shareholders.
The Wrong Price
Shareholders should ask themselves: Why should management and certain selected shareholders be allowed to claim for themselves the upside value in Reddy?
We believe the $31.25 price offered is grossly inadequate. That price does not reflect the strong market position of the Company, and its ability to generate increased profits from improved margins. For example, if the Company merely increased its margins to the level of its principal competitors, a substantial increase in shareholder value would result. Moreover, our discounted cash flow analysis suggests a valuation in the range of $42 to $44 per share. We believe patient solid execution, opportunistic acquisitions, and a focus on expanding margins is the best way for Reddy shareholders to realize full value for their shares.
Vote No
Join with us in sending a message to your Board of Directors that the GSO transaction is the wrong transaction, at the wrong time for the wrong price. We urge you to vote against the merger. Reddy is worth more and shareholders deserve better.
Respectfully,
/s/ Michael J. McConnell
Michael J. McConnell
Shamrock Activist Value Fund
