IAA - Ritchie Bros. planned IAA purchase gains support from proxy adviser Egan-Jones

2023-03-07 11:48:23 ET

Ritchie Bros. ( NYSE: RBA ) holders should vote to support the company's planned purchase of IAA Inc. ( NYSE: IAA ), proxy service Egan-Jones said, diverging from two other proxy firms that recommended voting against the deal.

"We believe that there is a compelling reason to vote on the proposed merger of RBA and IAA as the benefits of combining the two companies outweigh the benefits of remaining as a stand-alone company," Egan Jones said in a report. "In our view, the merger sets a realistic approach of shareholder value creation and maximization in the long-run.”

The Egan-Jones recommendation comes after IAA ( IAA ) shares dropped 7% on Monday after proxy advisers ISS and Glass Lewis recommended Ritchie Bros. ( RBA ) holders vote against the deal at a holder vote next Tuesday. The IAA shares fell as  investors believe the deal may not go through as the influential proxy services view may signal the end of the transaction as many holders are likely to follow the proxy firm recommendation.

"The potential risks associated with this transaction appear to outweigh the potential upside articulated by the board," ISS said in its report, according to Reuters on Monday.

Egan-Jones said it believes the IAA deal will be financially accretive to Ritchie Bros. ( RBA ), representing a $250 million-$780 million of EBITDA to accelerate de-leveraging.

Ritchie Bros. ( RBA ) shares initially plunged 18% on the day the original $7.3 billion IAA deal was announced in November with some analysts questioning the transaction. In January, Ritchie Brothers ( RBA ) sweetened its offer for auto salvage company IAA ( IAA ) with a larger cash component as Starboard Value LP made a $500 million investment in RBA.

On Tuesday Ritchie Bros. ( RBA ) announced plans to pay $1.08 a share special dividend upon closing of IAA ( IAA ) deal. The dividend will be payable March 28 to shareholders of record March 17.

Ritchie Bros. ( RBA ) shares fell 1.2% in trading on Tuesday.

RBA holders Janus Henderson, Luxor Capital and Eminence Capital have come against the deal , while IAA holder Ancora has supported it. Franchise Partners and Eagle Asset Management, which together own ~8% of Ritchie Bros. ( RBA ) shares, are supportive of the transaction.

On Friday one of Ritchie Bros. ( RBA ) top 15 holders, Vontobel Asset Management, said it supported the company's planned purchase of IAA IAA.

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