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Ritchie Bros. is lowering the overall value of its roughly US$6-billion offer to buy Illinois-based auto salvage and parts auction company IAA, but the revised proposal announced includes a special one-time dividend for its own shareholders.CODIE MCLACHLAN/The Canadian Press

After months of investor opposition to its multibillion-dollar takeover offer for IAA Inc., Ritchie Bros. Auctioneers Inc. is sweetening the deal.

Vancouver-based Ritchie Bros. RBA-T is actually lowering the overall value of its roughly US$6-billion offer to buy Illinois-based auto salvage and parts auction company IAA IAA-N, but the revised proposal announced Monday includes a larger cash component and a special one-time dividend for its own shareholders.

The original deal, announced on Nov. 7, 2022, offered US$10 in cash and 0.5804 Ritchie Bros. shares for each IAA share, equating to an overall deal value of US$44.92 per share.

Monday’s updated offer would increase the cash component to US$12.80 per IAA share, but would also lower the stock component to 0.5252 Ritchie Bros. shares for each IAA share, equating to US$44.40 per IAA share overall. The revised terms would also provide Ritchie Bros. shareholders with an additional one-time cash dividend of US$1.08 per share.

Part of the extra cash comes via a US$500-million capital injection from activist investor Starboard Value LP that was also announced on Monday. Ritchie Bros. will sell New York-based Starboard US$485-million’s worth of preferred shares in the company for US$73 per share with a 5.5-per-cent dividend and another US$15-million in common shares at US$59.72 per share, the company said. Ritchie Bros. shares closed at US$61.46 on the New York Stock Exchange on Monday.

Starboard will not be allowed to vote on the IAA transaction at a March 14 meeting, where shareholders will decide whether to support the revised takeover bid, though Ritchie Bros. said Starboard chief executive Jeffrey Smith will join its board of directors if the deal is ultimately approved.

After the original offer was announced, prominent shareholders on both sides of the proposed transaction immediately revolted. Luxor Capital Group, which owns roughly 3.6 per cent of Ritchie Bros. shares, filed a proxy statement last week urging shareholders to reject the deal, calling IAA a “highly challenged business that is structurally disadvantaged to its primary competitor.”

Ritchie Bros. chief executive Ann Fandozzi said in an interview there was “a lot of confusion” in the early days of the initial deal being announced.

“Since Nov. 7, I have spent pretty much my entire time on the road, most days two cities per day, really just meeting with our shareholders to understand how they thought about the deal,” Ms. Fandozzi said.

What she learned was that “our shareholders didn’t understand [the] salvage car [sector],” she said, referring to IAA’s core business. Shareholders liked the Ritchie Bros.’s core business of selling new and used heavy equipment via auction was counter-cyclical, Ms. Fandozzi said, whereas the auto sector is more cyclical in nature.

“[We were] explaining how the only sliver of car that is counter-cyclical is salvage car,” she said.

Luxor declined to comment Monday on the revised offer, though the new terms have managed to convince at least one previously unhappy IAA shareholder to support the transaction.

Ancora Holdings Group, which owns roughly 4 per cent of IAA, said in November that the original proposal was flawed and structured to benefit management at the expense of shareholders. However, after what Ancora described in a statement Monday as “a series of productive, private discussions with each company’s leadership team,” it has agreed to support the revised transaction.

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Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 24/04/24 4:00pm EDT.

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