The largest shareholder of Ritchie Bros. Auctioneers Inc. opposes the acquisition of IAA Inc., an auto dismantling and parts auction company.
Luxor Capital Group, which owns about 3.6% of Ritchie Bros.’s stake, said the 18% decline in the company’s share price since the deal was announced on November 7 was a sign investors were “clearly disgusted” by the deal. “I’m holding on to you.”
Luxor said the IAA merger would allow RBA investors to manipulate a weak and declining number two player with far more attractive business dynamics than the RBA currently enjoys. In a letter to the company on Friday, Bloomberg reviewed the transcript.
A spokeswoman for Ritchie Brothers, based in Burnaby, British Columbia, said the company could not comment on the letter, which it had not seen. They say the IAA deal will provide additional service income, which will increase within his first 12 months.
Canada’s Ritchie Bros. has agreed to acquire the IAA in a cash and stock transaction that values the company at approximately $6.2 billion ($46.88 per share). The announcement was hit by a record plunge in Ritchie Bros. shares, with the value of the deal reduced to about $5.6 billion as of Thursday, according to data compiled by Bloomberg.
The stock has fallen 9.6% over the year, putting Ritchie Bros.’s market value at approximately $6.1 billion. Based in Westchester, Illinois, his IAA stock has fallen 22% this year, reducing its market capitalization to his $5.3 billion.
The IAA’s top investors voted against the deal a week after it was announced. Ancora Holdings Group, which said it owns his 4% stake in the IAA, said in a letter to the company’s board that it planned to vote against the acquisition.
However, Ancora added that it believes Ritchie Bros. was a sensible buyer and has great admiration for running under CEO Anne Fanzzi. to pursue a modified transaction that includes more cash consideration and a higher premium.
Luxor says it wants Ritchie Bros. to remain an independent company and will vote against the merger. If the deal closes because either company’s shareholders vote against it, no split fee will be required, the company said in a letter.
This will allow Ritchie Bros. to focus on executing on the company’s core strategy, which could boost the stock price.