A top Ritchie Bros. Auctioneers Inc. shareholder is opposing a takeover of auto salvage and parts auction company IAA Inc., a business it calls “distinctly inferior.”
Luxor Capital Group, which owns about 3.6 percent of Ritchie Bros. shares, said an 18 percent drop in the company’s share price since the deal was announced Nov. 7 indicates investors’ “clear distaste” for the transaction.
“The IAA Merger will permanently subject RBA investors to the vagaries of operating a weaker and declining second place player with far less appealing business dynamics than those currently enjoyed by RBA, as a dominant leader with a long runway of growth ahead,” Luxor said in a letter dated Friday to the company, a copy of which Bloomberg reviewed.
A spokesperson for Ritchie Bros., based in Burnaby, British Columbia, said the company couldn’t comment on a letter it had not seen. They said the deal with IAA will unlock additional service revenue and be accretive within the first 12 months.
Canada’s Ritchie Bros. agreed to acquire IAA in a cash and stock deal that valued the company at about $6.2 billion, or $46.88 a share, a 19 percent premium at the time. The announcement was met by a record selloff in Ritchie Bros. shares, which has reduced the value of the transaction to about $5.6 billion as of Thursday, according to data that Bloomberg compiled.
With its shares now down 9.6 percent for the year, Ritchie Bros. has a market value of about $6.1 billion. Shares of IAA, based in Westchester, Illinois, have dropped 22 percent this year, cutting its market value to $5.3 billion.
A top IAA investor came out against the deal a week after it was announced. Ancora Holdings Group, which said it owned 4 percent of IAA, said in a letter to that company’s board that it planned to vote against the takeover because the deal was flawed and structured to benefit management at the expense of shareholders.
Ancora added, though, that it believed Ritchie Bros. was a logical buyer and that it had great admiration for its management under Chief Executive Officer Ann Fandozzi. The firm urged IAA’s board to pursue a modified transaction that included a larger cash consideration and a higher premium.
Luxor wants Ritchie Bros. to remain a standalone company, saying it will also vote against the merger. If the deal is terminated because the shareholders of either company vote it down, no break-up fee would be required, it said in its letter.
That would allow Ritchie Bros. to focus on executing the company’s core strategy and would likely push up its stock price.
