Ritchie Bros.’ Shareholders Vote in Favor of IAA Acquisition, According to Preliminary Results

On March 10, media reports showed that a majority of Ritchie Bros.’ RBA shareholders voted to approve the IAA acquisition. While these are preliminary results, we expect the final confirmation at the March 14 shareholder vote to show the same results. That said, the preliminary results show that 46% of voters were against the deal, which is more than we initially expected. Following the initial deal announcement, our view was that the deal would eventually close but would likely be contested by a small number of shareholders. Our main concern then was around the declining market share at IAA following the loss of a large insurance customer. IAA’s weakened catastrophic event response was the key factor to the large insurance player pivoting away from IAA. However, we think Ritchie Bros.’ yard footprint in Texas and Florida can help improve IAA’s catastrophic event business in the near term. On the other side, we think IAA’s yard footprint will help Ritchie Bros. drive greater transaction volume.

We are maintaining our $51 fair value estimate following the announcement, given we already baked in the acquisition into our valuation. Now, the focus for management shifts toward integrating IAA’s business. Looking further out, progress on the services opportunity will be the key milestone to watch for investors. In 2020, the company shared its vision to grow beyond being a transaction-based business by developing services to attach to equipment sales (on and off Ritchie Bros.’ auctions). This opportunity is still in its infancy today. We’ll look for updates from the company on this front going forward, particularly on attach rates related to financial services, parts, and services, in addition to inspection and appraisal services.