Ritchie shareholder Eminence Capital opposes IAA deal (updated)

RB Global

15/02/2023 17:34

(Adds details of planned acquisition, company and investor 
background)
    By Anirban Sen
       NEW YORK, Feb 15 (Reuters) - Eminence Capital, a
shareholder in Ritchie Bros Auctioneers Inc  RBA.TO , has come
out against the company's planned acquisition of U.S. auto
retailer IAA Inc  IAA.N , opposing a deal that has received
support from activists Starboard Value LP and Ancora Group
Holdings. 
    In a letter seen by Reuters, Eminence argued that IAA is not
a good strategic fit for Ritchie Bros, saying the transaction is
"more of a bailout for IAA shareholders than it is a strategic
opportunity for RBA shareholders." 
    "We believe that RBA’s proposed acquisition of IAA, at the
current deal terms, is a flawed transaction that burdens RBA
shareholders with unnecessary risk without providing enough
credible upside relative to the standalone RBA opportunity,"
said Ricky Sandler, chief investment officer at Eminence. 
    Eminence, which holds over 900,000 shares in Ritchie Bros,
said it intends to vote against the deal in the upcoming
shareholder meeting. 
    Last year, Canada-based Ritchie Bros, which auctions used
heavy equipment and trucks, agreed to buy IAA for $6 billion. In
January, Ritchie received a $500 million investment from
Starboard, allowing it to revise the terms of the deal to
include more cash. 
    "The current takeout price for IAA is not particularly
compelling for RBA shareholders who will assume the risk of what
is effectively a public market LBO that will likely require a
meaningful turnaround effort," said Eminence, which manages
roughly $7 billion of assets. 
    Last week, Ancora, which holds a 4% stake in IAA, said it
had accumulated a 0.5% stake in Ritchie Bros and reiterated its
support of the deal, having first come out in favor of the
transaction in January. 
    "We look forward to closing the IAA acquisition. We have
heard from many shareholders who are enthusiastic about this
transaction," Ritchie Bros said in a statement. 
    Eagle Asset Management and Independent Franchise Partners
have also supported the deal, while Deep Field Asset Management
and Janus Henderson Investors have opposed the merger.
    In a separate statement on Wednesday, activist investor
Discerene Group LP, which holds a 3.6% stake in IAA, also came
out against the merger and said it plans to vote against the
deal. 
    "Despite public sentiment against the merger, based on our
analysis, if the IAA and RBA vote were held today we see both
votes succeeding, with ~60%-65% of RBA holders voting in favor
of the deal," Raymond James analysts said in a note on Monday. 
    The companies will soon make their case to proxy advisory
firms ISS and Glass Lewis, which will make recommendations on
how shareholders should vote. 
    Shareholders of both companies vote on the deal at special
meetings on March 14.
 (Reporting by Anirban Sen in New York
Editing by Kim Coghill and Matthew Lewis)
 ((Anirban.Sen@thomsonreuters.com; Twitter: @asenjourno; Reuters
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