Canadian auction company Ritchie Bros. Auctioneers Inc. will boost the cash portion of its takeover offer for IAA Inc. and accept a $500 million investment from Starboard Value LP to help fund the deal.
(Bloomberg) — Canadian auction company Ritchie Bros. Auctioneers Inc. will boost the cash portion of its takeover offer for IAA Inc. and accept a $500 million investment from Starboard Value LP to help fund the deal.
Ritchie’s new bid is the equivalent of $44.40 per IAA share, based on Friday’s market close. The change is an attempt to appease investors who didn’t like the original terms. Ancora Holdings Group, which owns 4% of IAA and opposed the initial deal, has agreed to vote in favor, the companies said.
Ritchie, based in the Vancouver region, is offering $12.80 in cash and 0.5252 of a Ritchie share for each share of IAA, valuing the target at about $6 billion. The initial bid, announced in November, had $10 per share in cash but more stock.
Starboard Chief Executive Officer Jeffrey Smith will take a board seat if shareholders of Ritchie and IAA approve the deal, according to a statement Monday. The New York-based investment firm would own 3.7% of the company, post-merger.
IAA jumped 7.5% to $43.71 as of 9:43 a.m. in New York. Ritchie rose more than 3%.
Ritchie’s attempt to buy IAA has run into some opposition from its own investors. Luxor Capital Group, which has a 3.6% stake in the Canadian firm, said last week the transaction “risks permanent destruction of billions of dollars of RBA shareholder value” and that IAA is “a severely challenged business” that will require years to turn around. Luxor is reviewing the revised deal, a representative for the firm said Monday.
“We are pleased to have reached an amended agreement with IAA, which reflects feedback we’ve received from shareholders regarding the best structure for the transaction,” Ritchie Chief Executive Officer Ann Fandozzi said in a statement.
The new structure would leave Ritchie shareholders owning 59% of the company post-merger, with IAA holders owning 37% and Starboard the rest. Under the previous plan, IAA shareholders would have had 41% of the company.
Ritchie is also offering to pay its own shareholders a special dividend of $1.08 per share, contingent on the deal closing.
Starboard will buy $15 million of shares and $485 million in preferred equity that can be converted into common stock at $73 per Ritchie share. If the IAA deal doesn’t go through, the company can redeem the preferred shares at a small premium.
IAA sells used cars and trucks, heavy equipment and salvage vehicles at auctions.
If shareholders approve the deal on March 14, it could close soon after, Fandozzi said. Starboard won’t be allowed to vote its new shares on the deal.
(Updates with share prices, additional information on deal)
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