Ritchie Bros. Auctioneers buying IAA in deal worth US$7.3 billion, including debt

VANCOUVER — Shares in Ritchie Bros. Auctioneers Inc. plunged nearly 20 per cent after it announced a deal Monday to acquire U.S. company IAA Inc. in a transaction it valued at about US$7.3 billion including the assumption of US$1.0 billion of net debt.

The Vancouver-based company saw its shares down C$16.45 at C$67.62 in early afternoon trading on the Toronto Stock Exchange.

IAA auctions vehicles on a digital platform.

"Their highly complementary business in an adjacent vertical will allow us to unlock additional growth," said Ritchie Bros. chief executive Ann Fandozzi, who will be CEO of the combined company.

"Through our trusted brands, similar operating model, and complementary services, we expect to drive efficiencies and create a more resilient business."

Under the terms of the agreement, IAA shareholders will receive US$10 in cash and 0.5804 of a Ritchie Bros. common share for each share of IAA they own.

The purchase price, which the companies valued at US$46.88 per share using Ritchie Bros.' 10-day volume weighted average on the New York Stock Exchange of US$63.55, represents a premium of about 19 per cent to IAA's closing share price on Friday.

Ritchie Bros. shareholders will own about 59 per cent of the combined company and IAA shareholders will own about 41 per cent.

The deal will see IAA CEO and president John Kett and three other current members of the IAA board join the Ritchie Bros. board once the transaction is complete, while Ritchie Bros. chairman Erik Olsson will remain chairman.

IAA has nearly 4,500 employees and more than 210 facilities in the U.S., Canada and the United Kingdom.

The deal is expected to close in the first half of next year, subject to approval by the shareholders of both companies as well as regulatory approvals and other customary closing conditions.

Ritchie Bros., which keeps its books in U.S. dollars, announced the deal as it reported third-quarter net income of US$42.9 million or 38 cents per diluted share, up from a profit of US$32.4 million or 29 cents per diluted share in the same quarter last year.

Revenue for the quarter ended Sept. 30 totalled $411.5 million, up from $329.7 million in the third quarter of 2021.

This report by The Canadian Press was first published Nov.7, 2022.

Companies in this story: (TSX:RBA)

The Canadian Press