IAA - IAA Inc. floor likely mid $30s a share if Ritchie Bros. doesn't pan out - analyst

2023-03-08 15:27:05 ET

IAA Inc. ( NYSE: IAA ) share floor is likely around the mid $30s in the event that Ritchie Bros ( NYSE: RBA ) planned takeover comes to an end if RBA shareholders vote it down on Tuesday.

"While we expect a no-deal would generate near term volatility, we remain positive on salvage auction industry fundamentals and see ~10X TTM/"mid-$30's" as a likely floor for IAA shares," Jefferies analyst Bret Jordan, who has a hold rating on IAA, wrote in a note earlier Wednesday.

The note comes after influential proxy adviser ISS and Glass Lewis on Monday recommended that Ritchie Bros. ( RBA ) shareholders vote against the company's planned more than $7 billion purchase of IAA. Proxy adviser Egan-Jones recommended that RBA holders vote in favor of the deal.

Jefferies' Jordan highlighted that while IAA lost significant volumes from a "large customer" in 2021 and into early 2022, IAA's market share looks to have stabilized since Q122.

The floor on IAA a the height of the early 2002 share loss and margin pressure was ~10x TTM EBITDA and using a similar metric suggests that support for IAA at $33-$34 a share would be the "worst case" outlook.

On Tuesday Ritchie Bros. ( RBA ) announced plans to pay $1.08 a share special dividend upon closing of IAA ( IAA ) deal.

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