Ritchie Bros. Auctioneers and IAA announced Monday they have entered into a definitive agreement under which Ritchie Bros. will acquire IAA in a stock and cash transaction valued at approximately $7.3 billion including the assumption of $1 billion of net debt.
The transaction has the unanimous support of both boards of directors.
Under the terms of the merger agreement, IAA stockholders will receive $10.00 in cash and 0.5804 shares of Ritchie Bros. common stock for each share of IAA common stock they own. The purchase price of $46.88 per share represents a premium of approximately 19 percent to the closing share price of IAA common stock on Nov. 4, 2022, and 23 percent to the 10-day volume-weighted average price, using Ritchie Bros.' 10-day volume-weighted average price on the NYSE of $63.55. The total purchase price also reflects a transaction multiple of 13.6x IAA's last twelve-month Adjusted EBITDA as of Oct. 2, 2022.
Upon completion of the transaction, Ritchie Bros. — which also released its third-quarter earnings Monday — says stockholders will own approximately 59 percent of the combined company and IAA stockholders will own approximately 41 percent.
IAA is a leading global digital marketplace connecting vehicle buyers and sellers, and the transaction will diversify Ritchie Bros.' customer base by providing the company with a significant presence in the vehicle remarketing vertical that has strong industry fundamentals with proven secular growth, the company says. The combination also will accelerate Ritchie Bros. growth and strategic vision to create a next-generation global marketplace for commercial assets and vehicles, supported by advanced technologies and data analytics, Ritchie Bros. adds.
Additionally, the Ritchie Bros. management team has extensive experience in the automotive and insurance ecosystem, which will help shape the go-forward customer experience. With enhanced scale and an expanded addressable market, Ritchie Bros. will be able to drive additional gross transaction value growth through its platforms and auction sites, in turn generating more insights for its customers and expanding the adoption of Ritchie Bros.' other high-margin tech-enabled services, the company says.
"IAA accelerates our journey to become the trusted global marketplace for insights, services, and transaction solutions," says Ann Fandozzi, CEO, Ritchie Bros, who will continue to serve as CEO of the combined company. "Their highly complementary business in an adjacent vertical will allow us to unlock additional growth. Through our trusted brands, similar operating model, and complementary services, we expect to drive efficiencies and create a more resilient business."
Fandozzi adds, "This announcement is a testament to the passion and dedication of the Ritchie Bros. and IAA teams. We expect this transaction to create new and exciting growth and development opportunities for employees of both Ritchie Bros. and IAA as we scale our combined business. As we do so, we will continue to foster our aligned culture and shared values grounded in supporting and empowering our team to create a best-in-class customer experience."
The Ritchie Bros. board of directors will now expand to add IAA President and CEO John Kett and three other current members of the IAA Board following the close of the transaction. Erik Olsson, chairman of the Ritchie Bros. Board, will serve as chairman of the board of the combined company.
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"Together, IAA and Ritchie Bros. will have expanded global operations, accelerating international buyer development and enhancing ancillary services such as transportation and finance," says Kett. "The transaction will also provide compelling value to stockholders through the immediate cash component and the opportunity to participate in the substantial growth potential of our combined company with significant resources. I believe that very appealing new opportunities are ahead for IAA employees and new capabilities for customers as we enter this exciting new chapter with Ritchie Bros."
Ritchie Bros. will continue to be legally incorporated in Canada and will retain its offices and employee base in Burnaby, British Columbia. IAA's Chicago offices will serve as the official headquarters of the combined company. As of the transaction closing, approximately two thirds of the workforce will be in the United States on a combined basis.
Following the transaction close, Ritchie Bros. will continue to trade under the symbol RBA on both the NYSE and TSX, the company says.
The transaction is expected to close in the first half of 2023 subject to approval by Ritchie Bros. stockholders of the issuance of Ritchie Bros. stock in connection with the transaction and approval of IAA stockholders of the transaction, receipt of regulatory approvals and other customary closing conditions, the company adds.