Reuters — Canada’s Ritchie Bros. on Monday sweetened the cash component of its buyout offer for IAA Inc. by 28 per cent, valuing the U.S. auto retailer at US$5.94 billion, and also secured the backing of a key IAA shareholder which had questioned the initial offer.
The latest cash-and-stock offer at $44.40 per share, will allow Ritchie to tap into a growing market for heavy machinery and equipment, salvaged cars, trucks and motorcycles, as well as auto parts (all figures US$).
Chicago-based IAA’s online auction systems specialize in the marketing of “total-loss, damaged and low-value” vehicles and equipment, while Burnaby, B.C.-based Ritchie Bros. operates online and live auction markets in several sectors, including farm equipment, for which it has five live-auction facilities in Western Canada and seven in the U.S.
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IAA shares rose 4.9 per cent in morning trade, while Ritchie Bros.’ Toronto-listed shares were up three per cent.
The improved offer comes at a time when many companies are reducing costs and initiating layoffs in face of a potential economic downturn.
Shareholders of both the companies had initially pushed back the deal, set to be Ritchie’s biggest, and raised concerns about the poor structuring of the combination.
However, on Monday, IAA’s largest shareholder Ancora supported the revised bid. The activist investor had earlier questioned the sales process and the absence of a go-shop period.
Ritchie also said that Starboard Value chief Jeffrey Smith will join its board, with the activist investment firm making a $500 million investment.
“We look forward to benefiting from Jeff’s expertise and working together as we complete this transaction,” said Ann Fandozzi, CEO of Ritchie Bros.
Under the revised offer, IAA stockholders would receive $12.80 in cash, up from $10 earlier, and 0.5252 Ritchie Bros. share for each IAA share, down from 0.5804.
Ritchie made the initial offer in November, valuing the company at about $7.3 billion, including debt. That announcement triggered a large-scale selloff by investors, sending Ritchie’s stock down 18 per cent.
The deal will be put to vote for shareholders of both companies on March 14. The shares underlying Starboard’s investment will not be voted at the meeting, Ritchie said.
— Reporting for Reuters by Priyamvada C and Aishwarya Nair in Bangalore.
