The Carlyle Group is in the process of acquiring Canadian ice cube producer Arctic Glacier from HIG Capital for $723 million, according to a Moody’s Investors Service credit opinion seen by Agri Investor.
Arctic Glacier is a producer, marketer and distributor of packaged ice to more than 75,000 retail outlets, making it Canada’s largest ice company and second only to Reddy Ice in the US market. The company operates 45 production plants, 51 distribution facilities and reported $278 million in total revenue last year.
HIG acquired the company for $434.5 million in 2012 while its parent company, Arctic Glacier Income Fund, was in bankruptcy protection after having encountered challenges in the form of regulatory fees and high debt levels.
In late February, Moody’s assigned a B2 rating to a proposed $415 million first-lien term loan, the proceeds of which will be combined with $345 million in sponsor-contributed equity to fund the acquisition by Carlyle and other corporate initiatives.
A Carlyle representative declined to comment and a HIG representative did not reply to messages seeking further details by press time.
According to Moody’s documents, the Carlyle acquisition will lead to a more conservative financial policy at the Winnipeg, Canada-based company.
Moody’s wrote that although Arctic Glacier maintained a “solid” position in a highly-fractured ice cube market, its narrow product focus and exposure to regional economic conditions could hamper performance going forward.
The report also said that Moody’s expects the company to reduce leverage from current levels of 5.5X to below 5.0X over the next 12-18 months under Carlyle’s more conservative financial management.
In addition, the ratings agency wrote that it expects the company to have a “relatively aggressive acquisition appetite over time.”
Moody’s highlighted Arctic Glacier’s ongoing efforts to mitigate the adverse impacts of warmer weather on the ice business through cost-cutting measures including leases and short-term truck rentals during peak periods and reducing overtime pay.
“Regional performance over time will vary depending on weather patterns, but based on the company’s existing customer base, the West Coast and Central regions will continue to account for the majority of the company’s revenue generation,” Moody’s wrote. “As such, poor weather in these regions, which for the ice industry means rain and/or cold during peak selling periods, could have a material impact on sales and profitability in certain periods.”
Carlyle’s recent food-related investments include its participation in a consortium that paid $2.08 billion for the Hong Kong and China businesses of McDonald’s, the purchase of a majority stake in Chilean quick-service restaurant franchisor Gastronomia & Negocios and its acquisition of the owner of Japanese beansprout brand Meisui Bijin for an undisclosed sum.
HIG is a Miami-headquartered private equity firm with $21 billion in equity capital under management. The firm’s current food-related investments include poultry processor Albertville Quality Foods, sausage manufacturer Southern Quality Meats and Ready Pac Produce, which produces and markets ready-to-eat salad, vegetable and fruit products.