CA - IAA Inc. holder Ancora to oppose sale to Ritchie Bros. (update)

Update 10:30am : Updates shares, adds Ancora confirmation.

IAA Inc. ( NYSE: IAA ) holder Ancora Holdings plans to vote against the auto salvage company's sale to to Ritchie Bros. ( NYSE: RBA ) as the company believes the sale process was flawed and structured to benefit management. IAA rose 2%.

Ancora Holdings, which has a 4% stake in IAA, said that while it believe Ritchies Bros. is a logical acquirer for IAA, it has issues with the purchase price and lack of go-shop period associated with transaction, according to a letter sent to IAA's board on Monday.

"We view IAA's proposed sale to Ritchie Bros. as a poorly structured sweetheart deal that puts leadership's interests ahead of shareholder's best interests," Ancora CEO Frederick DiSanto and President James Chadwick wrote in the letter. "If the current structure and terms remain intact, we intend to do everything in our power to oppose the transaction."

The IAA opposition comes as Ritchie Bros. ( RBA ) shares plunged 18% on the day the $7.3 billion IAA deal was announced last Monday, with some analysts questioning the transaction. Ritchie Bros. shares gained 1.3% on Monday.

"A 19% premium is woefully insufficient given the industry’s historical take-out premiums, and the fact that Ritchie Bros. is a strategic buyer with a very manageable leverage profile," the Ancora executives wrote in the letter. "The Board should have secured more cash for IAA shareholders during negotiations considering the cash flow profile of the combined Ritchie Bros. and IAA entity."

Ancora argues that IAA board should pursue a modified transaction that includes, at a minimum, more cash and a higher premium. If the transaction isn't approved, Ancora plans to reconstitute the IAA board.

IAA didn't immediately respond to Seeking Alpha email request for comment. The news was earlier reported by Bloomberg.

The sale announcement comes after activist Ancora in March called for IAA ( IAA ) to either put itself up for sale or replace its CEO. Ancora said at the time that it believed IAA could see $55/share in a potential takeout.

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