Janus Henderson intends to vote against Ritchie Bros., IAA deal

Janus Henderson Group portfolio managers Brian Demain and Cody Wheaton sent a letter to the board of Ritchie Bros. (RBA) opposing the company’s proposed takeover of IAA (IAA). The letter states in part, "We have engaged in an open dialogue with Ritchie Brothers management since the announcement of the proposed acquisition of IAA on November 7, 2022 and have valued the opportunity to express our views. Our clients have been owners of Ritchie Brothers stock continuously for over ten years. As such, we have unique insight into the history and competitive positioning of the company, as well as a long-term perspective when evaluating major strategic initiatives, such as the proposed merger with IAA. We are against the Ritchie Brothers acquisition of IAA for the following reasons: At the core, we believe the merger would introduce a level of unnecessary risk for Ritchie Brothers shareholders…We believe the deal is a distraction from the core Ritchie Brothers strategy described by management…The IAA business has been losing share over the last several years and may be structurally disadvantaged versus its main competitor, Copart…It is evident from reading the proxy that merger discussions were initiated with IAA contacting Ritchie Brothers. This calls into question the strategic rationale for the deal from the Ritchie perspective…The used car market is beginning to regress from an artificial peak in prices created by COVID coupled with supply chain issues…The combined company will take on substantial debt to complete the transaction at a time when interest rates are rising…In summary, we have significant misgivings about the strategic and financial rationale for this deal, and think the structure and timing are concerning. Based on our current understanding and the current deal terms, it is our intention to vote against the transaction. "