Surprise buyer to keep Arctic Glacier and its workers in city

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This article was published 09/06/2012 (4856 days ago), so information in it may no longer be current.

It looks like Arctic Glacier and its 50-plus-person head office are staying in Winnipeg.

In a surprise twist in Arctic’s court-sanctioned search for a buyer, Miami-based private-equity firm H.I.G. Capital came up with the best offer for the Winnipeg-based packaged-ice company, effectively ending its two-year-long quest for recapitalization.

All of Arctic Glacier’s employees will be offered jobs in the new company that will be created.

Many people close to the proceedings expected rival ice company Reddy Ice of Dallas would make the best offer. That company had publicly stated its intention to buy Arctic’s assets to merge the two largest ice companies in North America.

No terms of the H.I.G. deal have yet been disclosed, but it has received endorsement from all parties involved in Arctic’s Companies’ Creditors Arrangement Act recapitalization process.

H.I.G. is a private-equity firm specializing in mid-sized companies. It has about $8.5 billion in investments, with a portfolio of about 50 companies, mostly in the United States.

The Arctic deal is expected to receive court approval and is to close July 31.

“This is a good thing for the company, for all the stakeholders, and it’s good for the city of Winnipeg,” Arctic CEO Keith McMahon said.

Arctic was placed in bankruptcy protection after the credit taps were tightened when Arctic breached its loan covenants.

The H.I.G. deal will be enough to pay off the secured creditors — West Face Capital and the Canada Pension Plan Investment Board — which are owed about $260 million.

It’s also expected to be enough to pay all of the company’s unsecured creditors — including a $10-million outstanding class-action settlement with U.S. ice purchasers — and there may even be enough for some distribution to unitholders, but that remains to be seen.

Most importantly, it will end four years of unrelenting financial challenges. Arctic’s troubles began in 2008, when the U.S. Department of Justice included the company in an investigation of antitrust activities in the packaged-ice business. About 80 per cent of Arctic’s revenues come from its U.S. operations.

Arctic pleaded guilty to some charges and agreed to a $9-million fine, but then was faced with a barrage of civil suits from parties in Canada and the U.S.

A corporate finance expert who spoke on condition his name not be used said going through a court-sanctioned bankruptcy-protection process is the best thing that can happen to a struggling company.

“Companies that emerge from bankruptcy are the healthiest companies you can find,” he said. “All the crap is cleaned out, all the plaque is gone from the arteries, all the overhang, all the issues, all the liabilities, the question marks, this lawsuit, that lawsuit. It’s a clean company that can now invest and focus on its business.”

McMahon said H.I.G. is interested in investing and growing the company and that may mean Arctic — which made dozens of acquisitions in the past — will be back in the deal business.

Asked about what happened to the publicly stated interest from Reddy Ice, McMahon suggested the uncertainty about whether regulators would allow the companies to merge might have been a consideration.

“The monitor looked at a number of factors. Obviously, price or value was an important one,” McMahon said. “But just as important is the certainty of getting a closing and the various conditions (required). Looking at all those factors, the H.I.G. offer was the best overall bid for our stakeholders.”

A U.S. investment executive familiar with the deal said many people are surprised Reddy wasn’t the winning bidder. Reddy recently went through its own recapitalization under bankruptcy protection that was designed at least in part to be able to acquire Arctic.

martin.cash@freepress.mb.ca