Iva Poshnjari, BNN Bloomberg
Ritchie Bros. Auctioneers Inc.'s effort to buy IAA Inc. has stirred up a lot of shareholder controversy and one analyst says he can see why.
The industrial giant's move to buy IAA, an automotive salvage, was made in hopes of growing its market share within the industry and expanding its presence at auction sites, among other factors, the company said in a press release that initially announced the deal on Nov 7, 2022.
Since then, Ritchie Bros. amended its US$6-billion cash-and-stock offer by putting forward a proposal with a slightly lower cash value and a special one-time dividend to its shareholders. The company is now offering IAA shareholders $12.80 per share in cash and 0.5252 common shares of Ritchie Bros. for each share of IAA common stock they own. Previously it had offered US$10 per share in cash and 0.5804 Ritchie Bros. shares for each IAA share, marking a shift in the cash-stock ratio of the deal.
The company also reported a profit in it's fourth-quarter results with revenue coming in at US$443.9 million, up from $359.4 million a year earlier.
“There’s a bit of a wishful thinking perspective from my perspective,” Maxim Sytchev, managing director of Industrial Products at National Bank Financial, said in a TV interview on Wednesday.
Sytchev noted that Ritchie Bros. attempt to grow IAA’s market share appears to be somewhat unrealistic as the company is already trailing far behind one if its main competitors.
“It’s very difficult to turnaround the ship which is lagging,” he added.
Sytchev and family members do not own shares of Ritchie Bros. His firm and investment banking clients do.
He also spoke to the challenges facing Ritchie Bros. and the investments needed should they close this deal.