Long-Term IAA Inc. Shareholder Discerene Group Believes in IAA’s Go-Alone Prospects If Proposed Value-Destroying Merger With Ritchie Bros. Auctioneers Is Voted Down by Shareholders
Discerene Group LP, holding approximately 3.6% of IAA's shares, expresses opposition to the proposed sale of IAA to Ritchie Bros. Auctioneers (RBA). They believe the sale undervalues IAA and threatens shareholder investments. Highlighting IAA's growth, they note that its revenue has outpaced RBA's since 2019, and it maintains a healthy EBITDA margin with low debt. Discerene advocates for a long-term strategy focused on sustainable growth and urges IAA's board to resist short-term market pressures. They are committed to helping IAA realize its potential as an independent company.
- IAA has generated faster revenue growth than RBA since 2019.
- IAA has a strong EBITDA performance with lower net debt (1.8x) compared to 2022 EBITDA.
- Proposed sale to RBA is seen as undervaluing IAA and poses risks of permanent capital impairment.
- Market pressure may lead to reactive decisions rather than long-term strategy.
Encourages IAA to Focus on
The full text of the letter follows.
Dear Fellow Shareholders,
Like many of you, we believe in the value-creation opportunity and long-term prospects at IAA, Inc. (“IAA”). For the reasons we have previously expressed publicly, we do not believe that the proposed sale (“Sale”) of IAA to Ritchie Bros. Auctioneers Incorporated (“RBA”) fairly compensates IAA shareholders for that opportunity and also puts our investment in IAA at significant risk of permanent capital impairment. Accordingly, we intend to vote against the Sale.
We believe that IAA is a structurally sound business that can thrive with appropriate oversight and incentive structures. Its business is growing despite the volume loss at a major customer. IAA has grown revenue faster than RBA since its 2019 spinoff, generates more EBITDA than RBA, and has just 1.8x of net debt/2022 EBITDA.1
We believe that IAA has many talented, dedicated, experienced, and high-performing people running its day-to-day business. The recent market narrative on IAA emanating from the Sale does not do them justice.
We expect IAA to move forward with conviction as a standalone company and create value for all IAA shareholders, including those of us who have supported the company for so long up to this point.
We encourage IAA’s Board of Directors to focus on building a sustainable, long-term business by putting in place an optimal strategy, executive team, and long-term economic alignment between management and shareholders, rather than bow reactively to short-term and impatient market narratives or whiplash trading pressures. We believe that the capital-markets tail should not wag the fundamental-business dog.
All businesses go through good and bad times. In challenging times, confident and long-term-minded shareholders, directors, and executives “lean in” and do not bail out.
Shareholders should not despair at the prospect of the Sale being voted down. We are ready and motivated to work with the IAA team and do our part to help IAA realize its full potential and grow into an even stronger independent company over the long term.
Sincerely,
About
Disclaimer
Please note: this is NOT a proxy solicitation.
This material does not constitute an offer to sell or a solicitation of an offer to buy any of the securities described herein in any state to any person. In addition, the discussions and opinions in this letter and the material contained herein are for general information only, and are not intended to provide investment advice. All statements contained in this letter that are not clearly historical in nature or that necessarily depend on future events are “forward-looking statements,” which are not guarantees of future performance or results, and the words “anticipate,” “believe,” “expect,” “potential,” “could,” “opportunity,” “estimate,” and similar expressions are generally intended to identify forward-looking statements.
The projected results and statements contained in this letter and the material contained herein that are not historical facts are based on current expectations, speak only as of the date of this letter and involve risks that may cause the actual results to be materially different. Certain information included in this material is based on data obtained from sources considered to be reliable. No representation is made with respect to the accuracy or completeness of such data, and any analyses provided to assist the recipient of this material in evaluating the matters described herein may be based on subjective assessments and assumptions and may use one among alternative methodologies that produce different results. Accordingly, any analyses should also not be viewed as factual and also should not be relied upon as an accurate prediction of future results.
All figures are unaudited estimates and subject to revision without notice. Discerene disclaims any obligation to update the information herein and reserves the right to change any of its opinions expressed herein at any time as it deems appropriate. Discerene has neither sought nor obtained the consent from any third party to use any statements or information contained herein that have been obtained or derived from statements made or published by such third parties. Except as otherwise expressly stated herein, any such statements or information should not be viewed as indicating the support of such third parties for the views expressed herein.
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1 See IAA and RBA reported financial statements.
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