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Canada's Ritchie Bros raises cash payout under revised offer for IAA

Published 01/23/2023, 09:50 AM
Updated 01/23/2023, 04:02 PM
© Reuters. FILE PHOTO: The sign outside Richie Bros. Auctioneers is seen in Longmont, Colorado, U.S., February 21, 2017. REUTERS/Rick Wilking
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(Reuters) -Canada's Ritchie Bros (NYSE:RBA) Auctioneers on Monday sweetened the cash component of its buyout offer for IAA (NYSE:IAA) Inc by 28%, valuing the U.S. auto retailer at $5.94 billion, and also secured the backing of a key IAA shareholder which had questioned the initial offer.

The latest cash-and-stock offer at $44.40 per share, will allow Ritchie to tap into a growing market for heavy machinery and equipment, salvaged cars, trucks and motorcycles, as well as auto parts.

IAA shares rose 4.9% in morning trade, while Ritchie Bros's Toronto-listed shares were up 3%.

The improved offer comes at a time when many companies are reducing costs and initiating layoffs in face of a potential economic downturn.

Shareholders of both the companies had initially pushed back the deal, set to be Ritchie's biggest, and raised concerns about the poor structuring of the combination.

However, on Monday, IAA's largest shareholder Ancora supported the revised bid. The activist investor had earlier questioned the sales process and the absence of a go-shop period.

Ritchie also said that Starboard Value LP chief Jeffrey Smith will join its board, with the activist investment firm making a $500 million investment.

"We look forward to benefiting from Jeff's expertise and working together as we complete this transaction," said Ann Fandozzi, chief executive officer of Ritchie Bros.

Under the revised offer, IAA stockholders would receive $12.80 in cash, up from $10 earlier, and 0.5252 Ritchie Bros. share for each IAA share, down from 0.5804.

Ritchie made the initial offer in November, valuing the company at about $7.3 billion, including debt.

© Reuters. FILE PHOTO: The sign outside Richie Bros. Auctioneers is seen in Longmont, Colorado, U.S., February 21, 2017. REUTERS/Rick Wilking

The announcement triggered a large scale selloff by investors, sending Ritchie's stock down 18%.

The deal will be put to vote for shareholders of both companies on March 14. The shares underlying Starboard's investment will not be voted at the meeting, Ritchie said.

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