By Svea Herbst-Bayliss
NEW YORK (Reuters) – Proxy advisory firms Institutional Shareholder Services and Glass Lewis on Monday recommended that shareholders reject Ritchie Brothers Auctioneers Inc’s planned $7 billion acquisition of U.S. auto retailer IAA Inc.
As investors often follow recommendations from the proxy firms, the move deals a blow to one of the year’s most widely watched takeover deals, which was first announced in November.
Both advisors underscored the potential risks associated with the deal, with ISS pointing to a drop in the stock price after the transaction was announced and a lag in performance as reasons for concern.
“It appears that RBA’s strong standalone prospects, proven over a period of time through robust performance, offer a better understood and verified path to shareholder value creation,” ISS wrote in its report, which was seen by Reuters.
Shareholders vote on March 14 on whether to approve the proposed deal.
The Ritchie Bros stock price climbed more than 5% in the first minutes of trading on Monday. IAA’s stock price dropped nearly 9%.
For Ritchie Bros, a Canadian company that auctions and sells used heavy industrial equipment, the acquisition is intended to diversify its customer base, boost growth and strategic plans by giving it a bigger footprint in vehicle remarketing, and help cut costs.
In January, Ritchie Bros received a $500 million investment from activist investor Starboard Value that allowed it to revise the deal terms and win critical support from investor Ancora Group Holdings, which had previously opposed the deal.
But a number of investors on both sides are pushing back on the deal, arguing it would distract Ritchie Bros from its core business and that it favors IAA shareholders without offering enough upside for RBA investors.
(Reporting by Svea Herbst-Bayliss; Editing by Chizu Nomiyama and Jan Harvey)
