Two influential proxy advisory firms said shareholders of Ritchie Bros. Auctioneers Inc. should vote against a takeover of IAA Inc., dealing a huge blow to the planned $6 billion deal.
(Bloomberg) — Two influential proxy advisory firms said shareholders of Ritchie Bros. Auctioneers Inc. should vote against a takeover of IAA Inc., dealing a huge blow to the planned $6 billion deal.
Ritchie’s “strong standalone prospects, proven over a period of time through robust performance, offer a better understood and verified path to shareholder value creation,” proxy adviser Institutional Shareholder Services Inc. said in a note opposing the deal. Glass Lewis & Co. also said investors should turn down the cash-and-stock transaction, which goes to a vote on March 14.
IAA tumbled 7.5% to $38.09 as of 12:09 p.m. in New York, more than $6.50 below the value of the takeover bid. Ritchie was up 3%.
Ritchie, a Canadian firm that sells heavy equipment at auctions around North America, announced its bid in November to buy IAA, which sells damaged and written-off vehicles. The deal has been controversial from the start, with some Ritchie shareholders saying the company is making a mistake by diversifying into the auto-salvage business.
Ritchie sought to win support by recasting the deal in January with more cash and less stock, bringing in Jeffrey Smith’s Starboard Value LP for a $500 million capital infusion. But that didn’t stop Ritchie from facing a proxy fight to stop the deal, led by major shareholder Luxor Capital Group, which argued the company is taking on too much financial and execution risk to buy an inferior business.
ISS echoed that sentiment. “RBA appears to have consistently downplayed these risks since announcing the transaction, frustrating some investors who are unsure whether to interpret it as the company’s underestimation of these risks or lack of disclosure,” the firm said in its note.
Ritchie management says the company will benefit from gaining access to IAA’s dozens of salvage yards, which can be used to take delivery of heavy equipment that Ritchie can auction.
In a statement, Ritchie said it strongly disagrees with the proxy advisers’ recommendations. The board is confident the proposed deal delivers value “superior to” to company’s standalone plan, it said, urging shareholders to vote for the proposal.
(Updates share price, adds company statement in the last paragraph)
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