Major Shareholder Backs Ritchie’s $6 Billion IAA Deal
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A large investor in Ritchie Bros. Auctioneers Inc. is backing the Canadian auction company’s proposed takeover of IAA Inc., giving a boost to a deal that has been opposed by other shareholders.
Independent Franchise Partners LLP is a “supportive shareholder” of Ritchie on the deal, according to a spokesperson for the London-based investment firm, which owns about 4.8% of Ritchie shares.
IAA jumped after Bloomberg reported IFP’s decision to support the deal, paring losses to trade down 0.3% at $41.11 as of 2:09 p.m. in New York. Ritchie was up 1.2%.
The cash-and-stock deal, which values IAA at about $6 billion, is being opposed by Ritchie shareholders Janus Henderson Investors and Luxor Capital Group. Earlier on Jan. 30, Janus released a letter to the Ritchie board saying the acquisition “would introduce a level of unnecessary risk for Ritchie Brothers shareholders.”
Eagle Asset Management Inc. also plans to vote in favor of the deal, portfolio manager Eric Mintz said in an interview. Funds managed by Eagle hold more than 2 million Ritchie shares, according to Mintz, who said Ritchie CEO Ann Fandozzi has made a strong case for the financial benefits of combining the two companies.
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“We’re supportive based on Ann’s vision, and based on the dynamics of the market overall being quite positive,” Mintz said by phone. Eagle was previously an IAA shareholder, he said.
Ritchie’s deal has met resistance from investors because it’s a strategic departure for the company, which auctions industrial equipment. IAA is in the used-car auction and salvage business.
“While we see some strategic merits to the merger, specifically synergies with the real estate footprint and some ability to share technology, we do not believe they are sufficient to justify the risk associated with the transaction,” said the Janus letter, which was signed by portfolio managers Brian Demain and Cody Wheaton, and analyst Scott Stutzman.
Ritchie has had “extensive engagement” with shareholders since announcing the deal, including Starboard Value LP and “three additional existing and new investors” that bought its stock because they believe in the benefits of the deal, a representative for Ritchie said in a statement.
A representative for IAA didn’t immediately respond to requests for comment.
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