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Eminence Capital to vote against Ritchie Bros. proposed IAA, Inc. merger

According to Reuters, Eminence Capital, a shareholder in Ritchie Bros Auctioneers Inc (RBA.TO), has come out against the company’s planned acquisition of U.S. auto retailer IAA Inc (IAA.N), opposing a deal that has received support from activists Starboard Value LP and Ancora Group Holdings.


Eminence Capital to vote against Ritchie Bros. proposed IAA, Inc. merger p

In a letter seen by Reuters, Eminence argued that IAA is not a good strategic fit for Ritchie Bros, saying the transaction is “more of a bailout for IAA shareholders than it is a strategic opportunity for RBA shareholders.”

“We believe that RBA’s proposed acquisition of IAA, at the current deal terms, is a flawed transaction that burdens RBA shareholders with unnecessary risk without providing enough credible upside relative to the standalone RBA opportunity,” said Ricky Sandler, chief investment officer at Eminence.

Eminence, which holds over 900,000 shares in Ritchie Bros, said it intends to vote against the deal in the upcoming shareholder meeting.

Last year, Canada-based Ritchie Bros, which auctions used heavy equipment and trucks, agreed to buy IAA for $6 billion. In January, Ritchie received a $500 million investment from Starboard, allowing it to revise the terms of the deal to include more cash.

“The current takeout price for IAA is not particularly compelling for RBA shareholders who will assume the risk of what is effectively a public market LBO that will likely require a meaningful turnaround effort,” said Eminence, which manages roughly $7 billion of assets.

Last week, Ancora, which holds a 4% stake in IAA, said it had accumulated a 0.5% stake in Ritchie Bros and reiterated its support of the deal, having first come out in favor of the transaction in January.

“We look forward to closing the IAA acquisition. We have heard from many shareholders who are enthusiastic about this transaction,” Ritchie Bros said in a statement.

Eagle Asset Management and Independent Franchise Partners have also supported the deal, while Deep Field Asset Management and Janus Henderson Investors have opposed the merger.

In a separate statement on Wednesday, activist investor Discerene Group LP, which holds a 3.6% stake in IAA, also came out against the merger and said it plans to vote against the deal.

“Despite public sentiment against the merger, based on our analysis, if the IAA and RBA vote were held today, we see both votes succeeding, with ~60%-65% of RBA holders voting in favor of the deal,” Raymond James analysts said in a note on Monday.

The companies will soon make their case to proxy advisory firms ISS and Glass Lewis, which will make recommendations on how shareholders should vote.

Shareholders of both companies vote on the deal at special meetings on March 14.