Ritchie Bros. Auctioneers (TSE:RBA) (NYSE:RBA), an auctioneer of heavy equipment and trucks, is changing the terms of its buyout offer for IAA, Inc. (NYSE:IAA), an auctioneer of used/damaged vehicles. It’s now offering more cash per share ($12.80/share) but has lessened the number of shares it will offer IAA (0.5252 shares of RBA for each share of IAA). The deal is currently worth $44.40/share compared to the previous offer of $46.88/share. On top of that, Ritchie Bros intends on paying a $1.08/share special dividend to shareholders if the IAA transaction closes.
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Back in November, Ritchie Bros announced its intention to acquire IAA for $7.3 billion, including $1 billion worth of net debt. The deal initially included cash of $10 and about 0.58 RBA shares per each IAA share, which contributed to a nearly 18% sell-off in RBA stock on November 7. However, the stock is up nearly 3% after the deal terms were amended.
Starboard Value LP, an activist hedge fund, supports the move and intends to invest $500 million in RBA, while its CEO plans to join RBA’s board.
However, this is not set in stone, as not everyone approves of the transaction. For example, Luxor Capital, a 3.6% owner of RBA, is against the deal because it feels that it’s a move away from Ritchie Bros.’ core business. Still, things are looking up, as Ancora Holdings, which owns roughly the same amount of IAA, now approves it.
Ritchie Bros anticipates synergies of $100 million of $120 million per year if the deal goes through, along with approximately $350 million to $900 million in incremental EBITDA annually.
Is Ritchie Bros Stock a Buy, According to Analysts?
According to analysts, Ritchie Bros stock comes in as a Moderate Buy based on four Buys, two Holds, and one Sell rating assigned in the past three months. The average RBA stock price target of C$82.98 implies just 0.6% upside potential.
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