UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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Emerging growth company
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Item 1.01 Entry into a Material Definitive Agreement.
As reported by Ritchie Bros. Auctioneers Incorporated (the “Company” or “RBA”) on January 23, 2023 in a Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”), the Company entered into a securities purchase agreement (the “Purchase Agreement”) with Starboard Value LP (“Starboard Value”), certain of its affiliated funds (the “Purchasers”), and Jeffrey C. Smith (together with Starboard Value and the Purchasers, “Starboard”), pursuant to which the Company agreed to issue and sell to the Purchasers, in a private placement (the “PIPE Transaction”) exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), and the prospectus requirements of British Columbia securities law, (i) an aggregate of 485,000,000 senior preferred shares of the Company designated as Series A Senior Preferred Shares (the “Preferred Shares”), which Preferred Shares are convertible into the Company’s common shares (the “Common Shares”, and such Common Shares as may be issued upon conversion of the Preferred Shares, the “Conversion Shares”), for an aggregate purchase price of $485.0 million, or $1.00 per Preferred Share, and (ii) an aggregate of 251,163 Common Shares (the “Purchased Common Shares” and, together with the Preferred Shares, the “Purchased Shares”), for an aggregate purchase price of $15.0 million, or $59.722 per Common Share. The PIPE Transaction closed on February 1, 2023 (the “Issue Date”).
In connection with the PIPE Transaction, on the Issue Date, the Company and the Purchasers entered into a registration rights agreement (the “Registration Rights Agreement”) pursuant to which the Company has agreed to grant the Purchasers certain customary registration rights (under U.S. securities laws) with respect to the Purchased Common Shares, the Conversion Shares and certain other securities that may be issued to the Purchasers in respect thereof (collectively, the “Registrable Securities”), subject to specified limitations. Pursuant to the terms of the Registration Rights Agreement, the Company has agreed to file with the SEC a registration statement covering the resale of the Registrable Securities and have such registration statement declared effective by the SEC no later than the earlier of (1) one business day after the date that the Company's and IAA, Inc.’s shareholders shall have voted upon the transactions contemplated by the Agreement and Plan of Merger and Reorganization, dated as of November 7, 2022, by and among the Company, Ritchie Bros. Holdings, Inc., a Washington corporation, Impala Merger Sub I, LLC, a Delaware limited liability company, Impala Merger Sub II, LLC, a Delaware limited liability company, and IAA, Inc., a Delaware corporation (the “Merger Agreement”), (2) one Business Day after the date the Merger Agreement is terminated in accordance with its terms, and (3) June 2, 2023.
The foregoing description of the Registration Rights Agreement does not purport to be complete and is subject to, and qualified in its entirety by reference to, the terms of the Registration Rights Agreement, which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.
Item 3.02 Unregistered Sales of Equity Securities.
The information contained in Items 1.01 and 5.03 of this Current Report on Form 8-K is incorporated herein by reference.
On the Issue Date, the Company issued the Preferred Shares and the Purchased Common Shares to the Purchasers, in a private placement in reliance on the exemption from the registration requirements of the Securities Act provided by Section 4(a)(2) of the Securities Act relating to sales by an issuer not involving any public offering and the prospectus requirements of British Columbia securities law. The Company relied on these exemptions from registration and the prospectus requirements based, in part, on representations made by the Purchasers in the Purchase Agreement. Under the terms of the Articles of Amendment (as defined below), the maximum conversion rate in respect of the Preferred Shares (including the maximum Make-Whole Amount) is 0.0167442 Common Shares per $1.00 face amount of Preferred Shares.
Item 3.03 Material Modification to Rights of Security Holders.
The information contained in Item 5.03 of this Current Report on Form 8-K regarding the Articles of Amalgamation is incorporated herein by reference.
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
The rights, preferences and privileges of the Preferred Shares are set forth in the articles of amendment of the Company (the “Articles of Amendment”), amending the Company’s Articles of Amalgamation. The Articles of Amendment became effective on February 1, 2023, and were filed by the Company pursuant to the Canada Business Corporations Act.
Pursuant to the terms of the Articles of Amendment, holders of the Preferred Shares (“Holders”) will have the right to convert their Preferred Shares any time or times on or after the Issue Date into a number of Common Shares equal to the face amount of such Preferred Shares multiplied by the then-applicable conversion rate (the “Conversion Rate”). The Conversion Rate will initially be 0.0136986 Common Shares per $1.00 face amount of Preferred Shares, subject to customary anti-dilution adjustment provisions.
Subject to certain conditions, the Company will have the right to cause all or any portion of the Preferred Shares to be converted into Common Shares at the Conversion Rate, if the closing price of the Common Shares on the NYSE equals or exceeds 190% of the Conversion Price during 20 trading days (whether or not consecutive) occurring in any 30 consecutive trading day period occurring on or after the third anniversary of the Issue Date and ending on the trading day immediately preceding the date the Company sends notice to the Holders of the exercise of such right. In addition, subject to certain conditions, the Company will have the right to cause all or any portion of the Preferred Shares to be converted into Common Shares at the Conversion Rate, if the closing price of the Common Shares on the NYSE equals or exceeds 175% of the Conversion Price during 20 trading days (whether or not consecutive) occurring in any 30 consecutive trading day period occurring on or after the seventh anniversary of the Issue Date and ending on the trading day immediately preceding the date the Company sends notice to the Holders of the exercise of such right.
In addition, in connection with any conversion of Preferred Shares described above, the Company will deliver, to the fullest extent permitted by law and out of funds lawfully available therefor, cash in respect of accrued and unpaid dividends on such converted Preferred Shares.
The Preferred Shares will not have a stated maturity date and will not be subject to any sinking fund.
Ranking
The Preferred Shares will rank, with respect to rights as to dividends, distributions, redemptions and payments upon the liquidation, dissolution and winding up of the Company, (a) senior to all of the junior preferred shares of the Company, Common Shares and any other class or series of capital shares of the Company, issued or authorized after the Issued Date, the terms of which do not expressly provide that such class or series ranks senior to or on a parity with the Preferred Shares, (b) on a parity basis with each other class or series of capital shares issued or authorized after the Issue Date, the terms of which expressly provide that such class or series ranks on a parity basis with the Preferred Shares, and (c) junior with each other class or series of capital shares issued or authorized after the Issue Date, the terms of which expressly provide that such class or series ranks senior to the Preferred Shares.
Dividends
From and after the Issue Date, Holders will be entitled to receive dividends on the Preferred Shares (the “Preferential Dividends”) at the rate of 5.50% per annum (the “Preferential Dividend Rate”), payable quarterly in arrears on March 15, June 15, September 15 and December 15 of each year. The Company may pay Preferential Dividends in cash or, in certain circumstances, Common Shares.
On the fourth anniversary of the Issue Date, Holders will have the right to increase the Preferential Dividend Rate to 7.50%, and on the ninth anniversary of the Issue Date, Holders will have the right to increase the Preferential Dividend Rate to a fixed percentage equal to the greater of (x) 600 bps over the daily simple SOFR as then in effect and (y) 10.50%, subject, in each case, to the Company’s right to redeem the Preferred Shares for which a dividend rate increase has been demanded (an “Increased Dividend Rate Demand”) as described below.
In addition, from and after the Issue Date, Holders will also be entitled to receive the greater of (i) any regular quarterly cash dividends paid to the holders of Common Shares and (ii) $0.27, subject to customary adjustment.
Company Redemption Rights
If the Merger Agreement is terminated in accordance with its terms and subject to certain conditions, then during the 90 day period following the later of (x) August 7, 2023 and (y) the termination of the Merger Agreement, the Company will have the right, subject to 10 days’ notice, to redeem between 50% and 100% of the Preferred Shares, at a price equal to 102% of the sum of (i) the face amount of such Preferred Shares and (ii) any accrued and unpaid dividends thereon. In addition, in connection with any Increased Dividend Rate Demand, subject to certain conditions, and upon 45 days’ notice to the Holders, the Company will have the right to redeem all or any portion of the Preferred Shares then outstanding, at a price equal to 100% of the face amount of such Preferred Shares plus any accrued and unpaid dividends thereon. Finally, at any time after the ninth anniversary of the Issue Date, subject to certain conditions, and upon 45 days’ notice to the Holders, the Company will have the right to redeem all or any portion of the Preferred Shares then outstanding, at a price equal to 100% of the face amount of such Preferred Shares plus any accrued and unpaid dividends thereon. For the avoidance of doubt, Holders will have the right to convert all or any portion of Preferred Shares called for redemption into Common Shares at the Conversion Rate plus payment of accrued and unpaid dividends on such converted Preferred Shares in lieu of redemption.
Voting
Other than in connection with the special meeting of the Company’s shareholders with respect to the approval of the issuance of Common Shares in connection with the Merger, Holders will be entitled to vote together with the Common Shares on an as-converted basis on all matters permitted by applicable law, subject to certain exceptions to enable compliance with applicable antitrust law.
Holders of Preferred Shares will also be entitled to a separate class vote with respect to amendments to the Company’s organizational documents that generally have an adverse effect on the Preferred Shares as well as other customary preferred shareholder approval rights.
Offer to Repurchase Upon Change of Control
Upon consummation of one or more specified change of control transactions (the “Change of Control Transaction”), the Holders will have the right to require the Company to repurchase the Preferred Shares in cash at an amount equal to the sum of (i) the greater of (A) the face amount of Preferred Shares submitted for repurchase and (B) the “Change of Control As-Converted Value” with respect to the Preferred Shares submitted for repurchase, (ii) the “Make-Whole Amount” and (iii) the “Change of Control Accrued Dividends Payment” (as each of those terms is defined in the Articles of Amendment) (the “Change of Control Redemption Price”); provided, however, that each Holder, at its option, may elect instead to convert its Preferred Shares into the applicable change of control consideration in accordance with the procedures set forth in the Articles of Amendment.
In addition, the Company has the right to redeem the Preferred Shares at the Change of Control Redemption Price in the event of a Change of Control Transaction where the successor entity is not traded on certain eligible markets as specified in the Articles of Amendment.
The foregoing description of the Preferred Shares and the Articles of Amendment does not purport to be complete and is subject to, and qualified in its entirety by reference to, the terms of the Articles of Amendment, which are attached hereto as Exhibit 3.1 and are incorporated herein by reference.
Forward-Looking Statements
This report contains information relating to a proposed business combination transaction between RBA and IAA in addition to information relating the investment into RBA by Starboard. This report includes forward-looking information within the meaning of Canadian securities legislation and forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (collectively, “forward-looking statements”). Forward-looking statements may include statements relating to future events and anticipated results of operations; business strategies; the anticipated benefits of the proposed IAA transaction; the anticipated impact of the proposed IAA transaction on the combined company’s business and future financial and operating results; the expected or estimated amount, achievability, sources, impact and timing of cost synergies and revenue, growth, operational enhancement, expansion and other value creation opportunities from the proposed IAA transaction; the expected debt, de-leveraging and capital allocation of the combined company; the anticipated closing date for the proposed IAA transaction; other aspects of RBA’s or IAA’s respective businesses, operations, financial condition or operating results; and other statements that are not historical facts. There can be no assurance that the proposed IAA transaction will in fact be consummated. These forward-looking statements generally can be identified by phrases such as “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “goal,” “projects,” “contemplates,” “believes,” “predicts,” “potential,” “continue,” “foresees,” “forecasts,” “estimates,” “opportunity” or other words or phrases of similar import.
It is uncertain whether any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do, what impact they will have on the results of operations and financial condition of the combined companies or the price of RBA’s common shares or IAA’s common stock. Therefore, you should not place undue reliance on any such statements and caution must be exercised in relying on forward-looking statements. While RBA’s and IAA’s management believe the assumptions underlying the forward-looking statements are reasonable, these forward-looking statements involve certain risks and uncertainties, many of which are beyond the parties’ control, that could cause actual results to differ materially from those indicated in such forward-looking statements, including but not limited to: the possibility that shareholders of RBA may not approve the issuance of new common shares of RBA in the transaction or that stockholders of IAA may not approve the adoption of the Merger Agreement; the risk that a condition to closing of the proposed IAA transaction may not be satisfied (or waived), that either party may terminate the Merger Agreement or that the closing of the proposed IAA transaction might be delayed or not occur at all; the anticipated tax treatment of the proposed IAA transaction; potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the proposed IAA transaction; the diversion of management time on transaction-related issues; the response of competitors to the proposed IAA transaction; the ultimate difficulty, timing, cost and results of integrating the operations of RBA and IAA; the effects of the business combination of RBA and IAA, including the combined company’s future financial condition, results of operations, strategy and plans; the failure (or delay) to receive the required regulatory approval of the transaction; the fact that operating costs and business disruption may be greater than expected following the public announcement or consummation of the proposed IAA transaction; the effect of the announcement, pendency or consummation of the proposed IAA transaction on the trading price of RBA’s common shares or IAA’s common stock; the ability of RBA and/or IAA to retain and hire key personnel and employees; the significant costs associated with the proposed IAA transaction; the outcome of any legal proceedings that could be instituted against RBA, IAA and/or others relating to the proposed IAA transaction; restrictions during the pendency of the proposed IAA transaction that may impact the ability of RBA and/or IAA to pursue non-ordinary course transactions, including certain business opportunities or strategic transactions; the ability of the combined company to realize anticipated synergies in the amount, manner or timeframe expected or at all; the failure of the combined company to realize potential revenue, growth, operational enhancement, expansion or other value creation opportunities from the sources or in the amount, manner or timeframe expected or at all; the failure of the trading multiple of the combined company to normalize or re-rate and other fluctuations in such trading multiple; changes in capital markets and the ability of the combined company to finance operations in the manner expected or to de-lever in the timeframe expected; the failure of RBA or the combined company to meet financial and/or KPI targets; any legal impediment to the payment of the special dividend by RBA, including TSX consent to the dividend record date; legislative, regulatory and economic developments affecting the business of RBA and IAA; general economic and market developments and conditions; the evolving legal, regulatory and tax regimes under which RBA and IAA operates; unpredictability and severity of catastrophic events, including, but not limited to, pandemics, acts of terrorism or outbreak of war or hostilities, as well as RBA’s or IAA’s response to any of the aforementioned factors. These risks, as well as other risks related to the proposed IAA transaction, are included in the Registration Statement (as defined below) and joint proxy statement/prospectus filed with the SEC and applicable Canadian securities regulatory authorities in connection with the proposed transaction. While the list of factors presented here is, and the list of factors presented in the Registration Statement are, considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties.
For additional information about other factors that could cause actual results to differ materially from those described in the forward-looking statements, please refer to RBA’s and IAA’s respective periodic reports and other filings with the SEC and/or applicable Canadian securities regulatory authorities, including the risk factors identified in RBA’s most recent Quarterly Reports on Form 10-Q and Annual Report on Form 10-K and IAA’s most recent Quarterly Reports on Form 10-Q and Annual Report on Form 10-K. The forward-looking statements included in this report are made only as of the date hereof. Neither RBA nor IAA undertakes any obligation to update any forward-looking statements to reflect actual results, new information, future events, changes in its expectations or other circumstances that exist after the date as of which the forward-looking statements were made, except as required by law.
No Offer or Solicitation
This report is not intended to and shall not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any securities, or a solicitation of any vote or approval, nor shall there be any offer, solicitation or sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act or pursuant to an exemption from, or in a transaction not subject to, such registration requirements.
Important Additional Information and Where to Find It
In connection with the proposed IAA transaction, RBA filed with the SEC and applicable Canadian securities regulatory authorities a registration statement on Form S-4 to register the common shares of RBA to be issued in connection with the proposed IAA transaction on December 14, 2022 (the “Registration Statement”). The Registration Statement includes a joint proxy statement/prospectus which will be sent to the shareholders of RBA and the stockholders of IAA seeking their approval of their respective transaction-related proposals. Each of RBA and IAA may also file other relevant documents with the SEC and/or applicable Canadian securities regulatory authorities regarding the proposed IAA transaction. This document is not a substitute for the proxy statement/prospectus or Registration Statement or any other document that RBA or IAA may file with the SEC and/or applicable Canadian securities regulatory authorities. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT ON FORM S-4 AND THE RELATED JOINT PROXY STATEMENT/PROSPECTUS, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS AND ANY OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC AND APPLICABLE CANADIAN SECURITIES REGULATORY AUTHORITIES IN CONNECTION WITH THE PROPOSED TRANSACTION OR INCORPORATED BY REFERENCE IN THE PROXY STATEMENT/PROSPECTUS, CAREFULLY AND IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE, BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT RBA, IAA AND THE PROPOSED IAA TRANSACTION.
Investors and security holders may obtain copies of these documents (when they are available) free of charge through the website maintained by the SEC at www.sec.gov, SEDAR at www.sedar.com or from RBA at its website, investor.ritchiebros.com, or from IAA at its website, investors.iaai.com. Documents filed with the SEC and applicable Canadian securities regulatory authorities by RBA (when they are available) will be available free of charge by accessing RBA’s website at investor.ritchiebros.com under the heading Financials/SEC Filings, or, alternatively, by directing a request by telephone or mail to RBA at 9500 Glenlyon Parkway, Burnaby, BC, V5J 0C6, Canada, and documents filed with the SEC by IAA (when they are available) will be available free of charge by accessing IAA’s website at investors.iaai.com or by contacting IAA’s Investor Relations at investors@iaai.com.
Participants in the Solicitation
RBA and IAA, certain of their respective directors and executive officers and other members of management and employees, and Jeffrey C. Smith and potentially other Starboard employees, may be deemed to be participants in the solicitation of proxies from the stockholders of RBA and IAA in respect of the proposed IAA transaction under the rules of the SEC. Information about RBA’s directors and executive officers is available in RBA’s definitive proxy statement on Schedule 14A for its 2022 Annual Meeting of Shareholders, which was filed with the SEC and applicable Canadian securities regulatory authorities on March 15, 2022, and certain of its Current Reports on Form 8-K. Information about IAA’s directors and executive officers is available in IAA’s definitive proxy statement on Schedule 14A for its 2022 Annual Meeting of Stockholders, which was filed with the SEC on May 2, 2022, and certain of its Current Reports on Form 8-K. Other information regarding persons who may be deemed participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, including information with respect to Mr. Smith, are contained or will be contained in the joint proxy statement/prospectus and other relevant materials filed or to be filed with the SEC and applicable Canadian securities regulatory authorities regarding the proposed IAA transaction when they become available. Investors should read the joint proxy statement/prospectus carefully before making any voting or investment decisions. You may obtain free copies of these documents from RBA or IAA free of charge using the sources indicated above.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit | ||
| Number | Description | |
| 3.1 | Articles of Amendment, dated February 1, 2023. | |
| 10.1* | Registration Rights Agreement, dated as of February 1, 2023, by and among Ritchie Bros. Auctioneers Incorporated and the Purchasers named therein. | |
| 104 | Cover Page Interactive Data File. | |
| * | Certain schedules and similar attachments have been omitted pursuant to Item 601(a)(5) of Regulation S-K. RBA agrees to furnish a supplemental copy of any omitted schedule or attachment to the SEC upon request. | |
| + | Furnished herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Ritchie Bros. Auctioneers Incorporated | ||
| By: | /s/ Darren Watt | |
| Darren Watt | ||
| General Counsel & Corporate Secretary | ||
Date: February 1, 2023