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![]() Ann Fandozzi | | | ![]() John W. Kett |
Chief Executive Officer | | | President and Chief Executive Officer |
Ritchie Bros. Auctioneers Incorporated | | | IAA, Inc. |
![]() | | | ![]() |
![]() Ann Fandozzi | | | ![]() John W. Kett |
Chief Executive Officer | | | President and Chief Executive Officer |
Ritchie Bros. Auctioneers Incorporated | | | IAA, Inc. |
1. | to approve the issuance of common shares of RBA (the “RBA common shares”) to securityholders of IAA, Inc., a Delaware corporation (“IAA”), in connection with the Agreement and Plan of Merger and Reorganization, dated as of November 7, 2022 (as amended or otherwise modified prior to January 22, 2023, the “original merger agreement”), as amended by that certain Amendment to the Agreement and Plan of Merger and Reorganization, dated as of January 22, 2023 (such amendment, the “merger agreement amendment” and, together with the original merger agreement, as it may be further amended or modified from time to time, the “merger agreement”), by and among RBA, Ritchie Bros. Holdings, Inc., a Washington corporation and a direct and indirect wholly owned subsidiary of RBA (“US Holdings”), Impala Merger Sub I, LLC, a Delaware limited liability company and a direct wholly owned subsidiary of US Holdings, Impala Merger Sub II, LLC, a Delaware limited liability company and a direct wholly owned subsidiary of US Holdings, and IAA, which issuance is referred to as the “RBA share issuance” and which proposal is referred to as the “RBA share issuance proposal”; and |
2. | to approve the adjournment of the RBA special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the RBA special meeting to approve the RBA share issuance proposal, which proposal is referred to as the “RBA adjournment proposal.” |
| | | | Registered Shareholders | | | Beneficial Shareholders | ||
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| | | | Common Shares held in own name and represented by a physical certificate or DRS. | | | Common Shares held with a broker, bank or other intermediary. | ||
![]() | | | Internet | | | www.investorvote.com | | | www.proxyvote.com |
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![]() | | | Telephone | | | 1-866-732-8683 | | | Call the applicable number listed on the voting instruction form. |
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![]() | | | Mail | | | Return the form of proxy in the enclosed postage paid envelope. | | | Return the voting instruction form in the enclosed postage paid envelope. |
1. | to adopt the merger agreement (as amended or modified) and thereby approve the transactions contemplated by the merger agreement, including the mergers (the “IAA merger proposal”); |
2. | to approve, on a non-binding advisory basis, the compensation that may be paid or become payable to named executive officers of IAA that is based on or otherwise relates to the merger agreement (as amended or modified) and the transactions contemplated by the merger agreement (as amended or modified) (the “IAA compensation proposal”); and |
3. | to approve the adjournment of the IAA special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the IAA special meeting to approve the IAA merger proposal (the “IAA adjournment proposal”). |
• | “FOR” the IAA merger proposal; |
• | “FOR” the IAA compensation proposal; and |
• | “FOR” the IAA adjournment proposal. |
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| | John P. Larson Chairman of the Board IAA, Inc. | | | John W. Kett Chief Executive Officer and President IAA, Inc. | | | Sidney Peryar Executive Vice President, Chief Legal Officer & Secretary IAA, Inc. |
For RBA shareholders: | | | For IAA stockholders: |
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Ritchie Bros. Auctioneers Incorporated 9500 Glenlyon Parkway, Burnaby, British Columbia, V5J 0C6, Canada Attn: Corporate Secretary (778) 331-5500 | | | IAA, Inc. Two Westbrook Corporate Center, Suite 500, Westchester, Illinois 60154 Attn: Secretary (708) 492-7000 |
For RBA shareholders: | | | For IAA stockholders: |
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MacKenzie Partners, Inc. 1407 Broadway, 27th Floor New York, New York 10018 (800) 322-2885 proxy@mackenziepartners.com | | | Innisfree M&A Incorporated 501 Madison Avenue, 20th Floor New York, New York 10022 Stockholders Call Toll-Free: (877) 750-8334 Banks and Brokers Call Collect: (212) 750-5833 |
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Laurel Hill 70 University Avenue, Suite 1440 Toronto, ON, M5J 2M4 North America Toll Free: 1-877-452-7184 Outside North America: 1-416-304-0211 Email: assistance@laurelhill.com | | | Kingsdale Advisors 130 King Street West, Suite 2950, P.O. Box 361 Toronto, Ontario M5X 1E2 Call Toll-Free (within North America): 1-866-851-3215 Call Collect (outside North America): (416) 867-2272 E-mail: contactus@kingsdaleadvisors.com |
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| | Period End | | | Average | | | Low | | | High | |
Year ended December 31, | | | | | | | | | ||||
(C$ per $) | | |||||||||||
2022 | | | 1.3544 | | | 1.3011 | | | 1.2451 | | | 1.3856 |
2021 | | | 1.2678 | | | 1.2535 | | | 1.2040 | | | 1.2942 |
2020 | | | 1.2732 | | | 1.3415 | | | 1.2718 | | | 1.4496 |
2019 | | | 1.2988 | | | 1.3269 | | | 1.2988 | | | 1.3600 |
2018 | | | 1.3642 | | | 1.2957 | | | 1.2288 | | | 1.3642 |
2017 | | | 1.2545 | | | 1.2986 | | | 1.2128 | | | 1.3743 |
| | Low | | | High | |
Month ended, | | | | | ||
(C$ per $) | | | | | ||
January 2023 (through January 25, 2023) | | | 1.3376 | | | 1.3658 |
December 2022 | | | 1.3433 | | | 1.3687 |
November 2022 | | | 1.3288 | | | 1.3749 |
October 2022 | | | 1.3547 | | | 1.3856 |
September 2022 | | | 1.2980 | | | 1.3726 |
August 2022 | | | 1.2753 | | | 1.3111 |
July 2022 | | | 1.2824 | | | 1.3138 |
June 2022 | | | 1.2540 | | | 1.3035 |
May 2022 | | | 1.2648 | | | 1.3039 |
April 2022 | | | 1.2451 | | | 1.2895 |
March 2022 | | | 1.2470 | | | 1.2867 |
February 2022 | | | 1.2677 | | | 1.2832 |
January 2022 | | | 1.2474 | | | 1.2772 |
December 2021 | | | 1.2642 | | | 1.2942 |
Source: | Bank of Canada website. |
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Term | | | Definition |
“acquiring person” | | | any person that has become, subject to certain exemptions set out in the RBA rights plan, the beneficial owner of 20% or more of the voting shares of RBA |
“Ancora” | | | Ancora Holdings Group, LLC and/or its applicable affiliates |
“articles of amendment” | | | Articles of Amendment of RBA, filed with Innovation, Science and Economic Development Canada on February 1, 2023 |
“BANA” | | | Bank of America, N.A. |
“BofA” | | | BofA Securities, Inc. together with BANA |
“bridge loan facility” | | | the senior secured 364-day bridge loan facility referenced in the debt commitment letter for an aggregate principal amount of up to $2.8 billion |
“Broadridge” | | | Broadridge Financial Solutions Inc. |
“Canadian Tax Act” | | | the Income Tax Act (Canada) and the regulations thereunder |
“cash consideration” | | | $12.80 in cash, without interest for each share of IAA common stock |
“CBCA” | | | the Canada Business Corporations Act |
“CES” | | | Corporate Election Services, Inc. |
“closing” | | | the closing of the transactions |
“closing date” | | | the date on which the closing actually occurs |
“Code” | | | the Internal Revenue Code of 1986, as amended |
“combined company” | | | the surviving company, including RBA and its subsidiaries, after giving effect to the mergers |
“Competition Act approval” | | | the receipt of an Advance Ruling Certificate or letter from the Canadian Commissioner of Competition that he does not, at that time, intend to make an application under Section 92 of the Competition Act (Canada) in respect of the mergers |
“cooperation agreement” | | | the cooperation agreement, dated as of January 22, 2023, by and between IAA and Ancora |
“debt commitment letter” | | | the Commitment Letter, as amended and restated on December 9, 2022, by and among GS Bank, BANA, BofA, Royal Bank, RBCCM and RBC. |
“DGCL” | | | the Delaware General Corporation Law |
“DTC” | | | Depository Trust Company |
“effective time” | | | the effective time of the first merger |
“equity award exchange ratio” | | | the sum of (a) the quotient (rounded to six (6) decimal places) obtained by dividing (i) the cash consideration by (ii) the volume weighted average price of RBA common shares for the five (5) consecutive trading days immediately prior to, but not including, the closing date as reported by Bloomberg, L.P. (or, to the extent not reported therein, a comparable financial reporting service) and (b) the exchange ratio |
“Exchange Act” | | | the Securities Exchange Act of 1934, as amended |
“exchange ratio” | | | 0.5252 of an RBA common share |
“excluded shares” | | | the shares of IAA common stock held by IAA as treasury stock, held by RBA, US Holdings, Merger Sub 1 or Merger Sub 2 immediately prior to the effective time or owned by IAA stockholders who have validly demanded and not withdrawn appraisal rights in accordance with Section 262 of the DGCL |
“first merger” | | | the merger of Merger Sub 1 with and into IAA, with IAA surviving as an indirect wholly owned subsidiary of RBA and a direct wholly owned subsidiary of US Holdings |
“flip-in event” | | | a transaction or other event pursuant to which any person (other than RBA or any subsidiary of RBA) becomes an acquiring person |
“Goldman Sachs” | | | Goldman Sachs & Co. LLC |
“GS Bank” | | | Goldman Sachs Bank USA |
“Guggenheim Securities” | | | Guggenheim Securities, LLC |
Term | | | Definition |
“HSR Act” | | | the Hart-Scott-Rodino Act, as amended |
“IAA” | | | IAA, Inc., a Delaware corporation |
“IAA adjournment proposal” | | | the proposal at the IAA special meeting to approve the adjournment of the IAA special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of such adjournment to approve the IAA merger proposal |
“IAA board” | | | the board of directors of IAA |
“IAA board recommendation” | | | the recommendation of the IAA board that the IAA stockholders approve the IAA merger proposal |
“IAA capital stock” | | | IAA common stock and IAA preferred stock |
“IAA common stock” | | | the common stock of IAA, par value $0.01 per share |
“IAA compensation committee” | | | the Compensation Committee of the IAA board |
“IAA compensation proposal” | | | the proposal at the IAA special meeting to approve, on a non-binding advisory basis, the compensation that may be paid or become payable to named executive officers of IAA that is based on or otherwise relates to the transactions contemplated by the merger agreement |
“IAA designees” | | | members of the RBA board effective as of the effective time to be designated by IAA |
“IAA directors deferred compensation plan” | | | the IAA, Inc. Directors Deferred Compensation Plan |
“IAA equity plan” | | | the IAA 2019 Omnibus Stock and Incentive Plan |
“IAA ESPP” | | | the IAA Employee Stock Purchase Plan |
“IAA executive agreement” | | | an employment agreement between IAA and its executive officers that provides for certain severance benefits |
“IAA merger proposal” | | | the proposal at the IAA special meeting to adopt the merger agreement and thereby approve the transactions contemplated by the merger agreement, including the mergers |
“IAA option” | | | each outstanding option to purchase shares of IAA common stock granted under the IAA equity plan |
“IAA phantom stock award” | | | each outstanding IAA phantom stock award granted to a non-employee director pursuant to the IAA equity plan |
“IAA preferred stock” | | | IAA preferred stock |
“IAA proxy solicitors” | | | Innisfree together with Kingsdale |
“IAA PRSU award” | | | each outstanding award of IAA restricted stock units granted pursuant to the IAA equity plan that was subject to performance-based vesting immediately prior to the effective time |
“IAA record date” | | | the close of business on January 25, 2023 |
“IAA restricted stock award” | | | each outstanding IAA restricted stock award granted to a non-employee director pursuant to the IAA equity plan |
“IAA RSU award” | | | each outstanding award of restricted stock units of IAA granted pursuant to the IAA equity plan that was subject solely to time-based vesting immediately prior to the effective time |
“IAA securityholder” | | | holder of IAA capital stock, IAA option, IAA PRSU award, IAA restricted stock award, IAA RSU award or IAA phantom stock award |
“IAA special meeting” | | | a special meeting of IAA stockholders to vote on the proposals necessary to complete the mergers, including the IAA merger proposal, and any adjournments or postponements thereof |
“IAA special meeting website” | | | the website for IAA stockholders to virtually attend and vote at the IAA special meeting |
“IAA spin-off” | | | the separation of IAA from KAR Auction Services, Inc. (“KAR”), which was completed on June 28 2019 |
“IAA stockholder approval” | | | the approval of the IAA merger proposal by the holders of a majority of the outstanding shares of IAA common stock entitled to vote thereon |
“IAA stockholders” | | | the holders of IAA common stock |
Term | | | Definition |
“Innisfree” | | | Innisfree M&A Incorporated |
“J.P. Morgan” | | | J.P. Morgan Securities LLC |
“Kingsdale” | | | Kingsdale Advisors |
“Laurel Hill” | | | Laurel Hill Advisory Group |
“Luxor” | | | Luxor Capital Group, LP and its affiliates |
“MacKenzie Partners” | | | MacKenzie Partners, Inc. |
“merger agreement” | | | the original merger agreement, as amended by the merger agreement amendment and as it may be further amended or modified from time to time |
“merger agreement amendment” | | | the Amendment to the Agreement and Plan of Merger and Reorganization, dated as of January 22, 2023, by and among RBA, US Holdings, Merger Sub 1, Merger Sub 2 and IAA |
“merger consideration” | | | for each outstanding share of IAA common stock (other than excluded shares) outstanding as of the effective time (1) 0.5252 of an RBA common share and (2) $12.80 in cash, without interest and less any applicable withholding taxes |
“Merger Sub 1” | | | Impala Merger Sub I, LLC, a Delaware limited liability company and a direct wholly owned subsidiary of US Holdings |
“Merger Sub 2” | | | Impala Merger Sub II, LLC, a Delaware limited liability company and a direct wholly owned subsidiary of US Holdings and indirect wholly owned subsidiary of RBA |
“mergers” | | | the first merger and the second merger |
“NYSE” | | | the New York Stock Exchange |
“original merger agreement” | | | the Agreement and Plan of Merger and Reorganization, dated as of November 7, 2022, by and among RBA, US Holdings, Merger Sub 1, Merger Sub 2 and IAA, as amended or otherwise modified prior to January 22, 2023 |
“RBA” | | | Ritchie Bros. Auctioneers Incorporated, a company organized under the federal laws of Canada |
“RBA adjournment proposal” | | | the proposal at the RBA special meeting to approve the adjournment of the RBA special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the RBA special meeting to approve the RBA share issuance proposal |
“RBA board” | | | the board of directors of RBA |
“RBA board recommendation” | | | the recommendation of the RBA board that the RBA shareholders approve the RBA share issuance proposal |
“RBA capital shares” | | | RBA common shares, RBA preferred shares and the RBA junior preferred shares |
“RBA common shares” | | | the common shares of RBA |
“RBA designees” | | | members of the RBA board to be designated by RBA |
“RBA equity plans” | | | collectively, RBA’s Employee Performance Share Unit Plan (March 2015), RBA’s Senior Executive Performance Share Unit Plan (March 2015), RBA’s Amended and Restated Employee Restricted Share Unit Plan, RBA’s Amended and Restated Senior Executive Restricted Share Unit Plan, and RBA’s Amended and Restated Stock Option Plan |
“RBA ESPP” | | | the RBA 1999 Employee Stock Purchase Plan, as amended |
“RBA junior preferred shares” | | | the junior preferred shares of RBA |
“RBA option” | | | options to purchase RBA common shares |
“RBA preferred shares” or “RBA Series A senior preferred shares” | | | the RBA senior preferred shares designated as Series A senior preferred shares |
“RBA proxy solicitors” | | | MacKenzie Partners together with Laurel Hill |
“RBA record date” | | | the close of business on January 25, 2023 |
“RBA senior preferred shares” | | | the senior preferred shares of RBA |
Term | | | Definition |
“RBA share issuance” | | | the issuance of RBA common shares to IAA securityholders in connection with the mergers pursuant to the merger agreement |
“RBA share issuance proposal” | | | the proposal at the RBA special meeting to approve the RBA share issuance |
“RBA shareholder approval” | | | the approval of the RBA share issuance proposal by the affirmative vote of a majority of the votes cast by holders of the outstanding RBA common shares |
“RBA shareholders” | | | the holders of RBA common shares |
“RBA special meeting website” | | | the website for RBA shareholders to virtually attend and vote at the RBA special meeting |
“RBA special meeting” | | | a special meeting of RBA shareholders to vote on the proposals necessary to complete the mergers, including the RBA share issuance proposal, and any adjournments or postponements thereof |
“RBCCM” | | | RBC Capital Markets, LLC |
“Royal Bank” | | | Royal Bank of Canada |
“SEC” | | | the Securities and Exchange Commission |
“second merger” | | | the merger of IAA, as the surviving corporation of the first merger, with and into Merger Sub 2, with Merger Sub 2 surviving as a wholly owned subsidiary of US Holdings |
“Securities Act” | | | the Securities Act of 1933, as amended |
“SEDAR” | | | the System for Electronic Document Analysis and Retrieval |
“share consideration” | | | a number of RBA common shares for each share of IAA common stock, equal to the exchange ratio |
“special meetings” | | | the IAA special meeting and the RBA special meeting, collectively |
“Starboard” | | | Starboard Value LP and certain of its affiliated funds |
“surviving corporation” | | | the company continuing in existence after the first merger |
“surviving LLC” | | | the surviving company following the second merger |
“transactions” | | | the mergers and the other transactions contemplated by the merger agreement, including the RBA share issuance |
“TSX” | | | the Toronto Stock Exchange |
“U.S. GAAP” | | | U.S. generally accepted accounting principles |
“US Holdings” | | | Ritchie Bros. Holdings, Inc., a Washington corporation and a direct and indirect wholly owned subsidiary of RBA |
• | RBA share issuance: RBA shareholders must approve a proposal to issue RBA common shares to IAA securityholders in connection with the mergers for purposes of applicable NYSE and TSX rules; and |
• | IAA merger proposal: IAA stockholders must approve a proposal to adopt the merger agreement and thereby approve the transactions contemplated by the merger agreement, including the mergers. |
• | Internet: To vote via the internet, go to www.proxyvote.com to complete an electronic proxy card. RBA shareholders will be asked to provide the 16-digit control number from the WHITE proxy card they receive. Internet voting is available 24 hours a day, seven days a week, and will be accessible until 8:30 a.m., Pacific Time, on March 10, 2023. RBA shareholders will be given an opportunity to confirm that their voting instructions have been properly recorded. RBA shareholders who submit a proxy this way need not send in their proxy card by mail. |
• | Telephone: To vote by telephone, dial 1-800-690-6903 (the call is toll-free in the United States and Canada; toll charges apply to calls from other countries) and follow the recorded instructions. Telephone voting is available 24 hours a day and will be accessible until 8:30 a.m., Pacific Time, on March 10, 2023. Easy-to-follow voice prompts will guide shareholders through the voting process and allow them to confirm that their instructions have been properly recorded. RBA shareholders who submit a proxy this way need not send in their proxy card by mail. |
• | Mail: To vote by mail using the WHITE proxy card (if the RBA shareholder requested paper copies of the proxy materials to be mailed to them), RBA shareholders should submit their proxy by properly completing, signing, dating and mailing their proxy card in the postage-paid envelope provided (if mailed in the United States or Canada). RBA shareholders who vote this way should mail the proxy card early enough so that it is received by 8:30 a.m., Pacific Time, on March 10, 2023 before the date of the RBA special meeting. |
• | Virtually via the RBA Special Meeting Website: To vote at the RBA special meeting, visit www.virtualshareholdingmeeting.com/RBA2023SM, where RBA shareholders can virtually attend and vote at the RBA special meeting. RBA shareholders will be asked to provide the 16-digit control number from the WHITE proxy card they receive in order to access the RBA special meeting website. |
• | By Internet Before the IAA Special Meeting: To vote via the internet, IAA stockholders should go to the website listed on their enclosed proxy card and follow the instructions to complete an electronic proxy card. IAA stockholders will be asked to provide their control number included with their proxy materials. Internet voting for IAA stockholders will be available 24 hours a day. IAA stockholder’s votes must be received before the polls close at the IAA special to be counted. If an IAA stockholder votes via the internet, they do not need to return a proxy card by mail; |
• | By Telephone: To vote via telephone, dial the toll-free telephone number shown on your proxy card. IAA stockholders will be asked to provide the control number included with their proxy materials. Telephone voting for IAA stockholders will be available 24 hours a day. IAA stockholder’s votes must be received before the polls close at the IAA special meeting to be counted. If an IAA stockholder votes via telephone, they do not need to return a proxy card by mail; |
• | By Mail: To vote by mail using the proxy card, IAA stockholders need to complete, sign and date the proxy card and return it promptly by mail using the enclosed, pre-addressed, postage paid envelope so that it is received before the polls close at the IAA special meeting. The persons named in the proxy card will vote the shares you own in accordance with your instructions on the proxy card you mail; or |
• | Virtually via the IAA Special Meeting Website: To attend the IAA special meeting, you will need to pre-register for the IAA special meeting by 11:30 a.m., Eastern Time on March 13, 2023. Please have your proxy card, or voting instruction form, containing your control number available and follow the instructions to complete your registration request. After registering, stockholders will receive a confirmation email with a link and instructions for accessing the IAA special meeting. Please verify that you have received the confirmation email in advance of the IAA special meeting, including the possibility that it may be in your spam or junk folder. You must pre-register to vote and/or submit a question during the IAA special meeting. In order for a beneficial holder of shares of IAA common stock to vote by ballot at the IAA special meeting, such holder will need to obtain and submit a legal proxy from his or her bank, broker or other nominee. |
• | properly submitting a new, later-dated proxy card for the applicable special meeting that is received by the deadline specified on the accompanying proxy card (in which case only the later-dated proxy is counted and the earlier proxy is revoked); |
• | giving written notice of your revocation to the registered office of RBA, 9500 Glenlyon Parkway, Burnaby, British Columbia V5J 0C6 or IAA’s Corporate Secretary at Two Westbrook Corporate Center, Suite 500, Westchester, Illinois, 60154, which must be received not less than 24 hours prior to the time that such proxies are exercised and shares are voted at the RBA or IAA special meeting, as applicable; |
• | submitting a proxy via the internet or by telephone at a later date, which must be received before the polls are closed at the IAA special meeting, in the case of IAA stockholders, or before 8:30 a.m., Pacific Time, on March 10, 2023 at the RBA special meeting, in the case of RBA shareholders (in each case, only the later-dated proxy is counted and the earlier proxy is revoked); or |
• | virtually attending and voting at the applicable special meeting via the applicable special meeting website. Note that a proxy will not be revoked if you attend, but do not vote at, the applicable special meeting. Only your last submitted proxy will be considered. |
If you are an RBA shareholder: | | | If you are an IAA stockholder: |
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![]() MacKenzie Partners, Inc. 1407 Broadway, 27th Floor New York, New York 10018 (800) 322-2885 proxy@mackenziepartners.com | | | ![]() Innisfree M&A Incorporated 501 Madison Avenue, 20th Floor New York, New York 10022 Stockholders Call Toll-Free: (877) 750-8334 Banks and Brokers Call Collect: (212) 750-5833 |
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![]() Laurel Hill 70 University Avenue, Suite 1440 Toronto, ON, M5J 2M4 North America Toll Free: 1-877-452-7184 Outside North America: 1-416-304-0211 Email: assistance@laurelhill.com | | | ![]() Kingsdale Advisors The Exchange Tower 130 King Street West, Suite 2950 Toronto, ON M5X 1E2 North America Toll Free: 1-866-851-3215 Outside North America: (416) 867-2272 Email: contactus@kingsdaleadvisors.com |
• | each IAA equity award held by an executive officer or director will receive the treatment, and is eligible for, the applicable vesting acceleration benefit, described in the section entitled “Interests of IAA Directors and Executive Officers in the Mergers—Treatment of Equity and Equity Based Awards;” |
• | each IAA executive officer is party to an employment agreement with IAA that provides for severance benefits upon a qualifying termination, including enhanced severance benefits if a qualifying termination of the executive officer occurs within two years following a “change in control” (which includes the closing of the mergers) as described in the section entitled “Interests of IAA Directors and Executive Officers in the Mergers—Severance Entitlements;” |
• | each IAA executive officer may become eligible to receive an annual cash incentive bonus for the fiscal year in which the closing of the mergers occurs as described in the section entitled “Interests of IAA Directors and Executive Officers in the Mergers—2023 Annual Bonuses;” |
• | the IAA compensation committee may, but is not obligated to, pay certain IAA executive officers (other than IAA’s Chief Executive Officer) a cash transaction bonus payable on the closing date as described in the section entitled “Interests of IAA Directors and Executive Officers in the Mergers—Transaction Bonuses;” |
• | the IAA compensation committee may, but is not obligated to, pay certain IAA executive officers (but will not make any such payment to IAA’s Chief Executive Officer) cash retention bonuses payable after the closing date as described in the section entitled “Interests of IAA Directors and Executive Officers in the Mergers—Retention Bonuses;” |
• | each IAA executive officer was eligible to receive acceleration of (i) the vesting and/or income inclusion of certain of his or her IAA equity awards and/or (ii) payment of his or her fiscal year 2022 incentive bonus into fiscal year 2022, subject to claw back, as described below in the section entitled “Interests of IAA Directors and Executive Officers in the Mergers—280G Mitigation Actions;” |
• | each IAA executive is eligible to continue to receive certain compensation and benefits for one year following the closing of the mergers as described in the section entitled “The Merger Agreement—Employee Benefits Matters;” |
• | IAA directors and officers are entitled to continued indemnification and insurance coverage under the merger agreement as described in the section entitled “Interests of IAA Directors and Executive Officers in the Mergers—Director and Officer Indemnification and Insurance;” and |
• | RBA’s agreement to add three of IAA’s current directors to the RBA board (as designated by IAA and deemed acceptable by RBA) at the effective time. |
• | each outstanding IAA option to purchase shares of IAA common stock granted under the IAA equity plan whether vested or unvested, will, automatically and without any action on the part of the parties to the merger agreement or any holder of an IAA option, be assumed by RBA and converted into an option to purchase the number of RBA common shares (rounded down to the nearest whole share) equal to the product obtained by multiplying (i) the number of shares of IAA common stock subject to such IAA option immediately prior to the effective time by (ii) the equity award exchange ratio, at an exercise price per RBA common share equal to the quotient obtained by dividing (x) the per share exercise price of such IAA option immediately prior to the effective time by (y) the equity award exchange ratio (rounded down to the nearest whole share). The equity award exchange ratio is equal to the sum of (a) the quotient (rounded to six decimal places) obtained by dividing (i) the cash consideration by (ii) the volume weighted average price of the RBA common shares for the five consecutive trading days immediately prior to, but not including, the closing date of the mergers as reported by Bloomberg, L.P. (or, to the extent not reported therein, a comparable financial reporting service) and (b) the exchange ratio. Except as set forth above, each assumed IAA option will be subject to the same terms and conditions, including vesting, exercise, expiration and forfeiture provisions, applicable to the corresponding IAA option immediately prior to the effective time (including the terms of the IAA equity plan and the applicable stock option agreement); |
• | each outstanding IAA RSU award granted pursuant to the IAA equity plan that was subject solely to time-based vesting immediately prior to the effective time, will automatically and without any action on the part of the parties to the merger agreement or any holder of an IAA RSU award, be assumed by RBA and converted into the right to receive, upon vesting, the number of RBA common shares (rounded down to the nearest whole share) equal to the product obtained by multiplying (i) the number of shares of IAA common stock subject to such IAA RSU award immediately prior to the effective time by (ii) the equity award exchange ratio. Except as set forth above, each assumed IAA RSU award will be subject to the same terms and conditions, including vesting and forfeiture terms, applicable to the corresponding IAA RSU award as of immediately prior to the effective time (including the terms of the IAA equity plan and the applicable restricted stock unit agreement); |
• | each outstanding IAA PRSU award granted pursuant to the IAA equity plan that was subject to performance-based vesting immediately prior to the effective time, will automatically and without any action on the part of the parties to the merger agreement or any holder of an IAA PRSU award, be assumed by RBA and converted into the right to receive, upon vesting, the number of RBA common shares (rounded down to the nearest whole share) equal to the product obtained by multiplying (i) the number of shares of IAA common stock subject to such IAA PRSU award immediately prior to the effective time (determined based on the target number of shares subject to such IAA PRSU award) by (ii) the equity award exchange ratio. Except as set forth above, each assumed IAA PRSU award will be subject to the same terms and conditions, including time-based vesting and forfeiture provisions, but not performance-vesting provisions, as applied to the corresponding IAA PRSU award as of immediately prior to the effective time (including the terms of the IAA equity plan and the applicable restricted stock unit agreement); |
• | each outstanding IAA restricted stock award granted to a non-employee director pursuant to the IAA equity plan will automatically vest in full and each share of IAA common stock underlying such IAA restricted stock award will be treated as an outstanding share of IAA common stock for all purposes of the mergers, including for purposes of receiving the merger consideration; and |
• | each outstanding IAA phantom stock award granted to a non-employee director pursuant to the IAA equity plan will automatically vest in full and each share of IAA common stock underlying such IAA phantom stock award will be treated as an outstanding share of IAA common stock for all purposes of the mergers, including for purposes of receiving the merger consideration. |
• | the approval of the IAA merger proposal by the holders of a majority of the outstanding shares of IAA common stock entitled to vote thereon; |
• | the approval of the RBA share issuance proposal by the affirmative vote of a majority of the votes cast by holders of outstanding RBA common shares entitled to vote thereon; |
• | the expiration or termination of any waiting period under the HSR Act and the receipt of the Competition Act approval; |
• | the absence of any order, injunction or regulation by a court or other governmental entity that prevents or materially impairs the consummation of the mergers; |
• | the effectiveness of the registration statement of which this joint proxy statement/prospectus forms a part and the absence of a stop order or proceedings threatened or initiated by the SEC for that purpose; and |
• | the RBA common shares to be issued pursuant to the mergers having been approved for listing on the NYSE and the TSX. |
• | If RBA terminates the merger agreement: |
○ | due to an IAA change of recommendation, then IAA must pay the termination amount of $189 million in cash by wire transfer of immediately available funds to an account designated by RBA no later than three business days after such termination of the merger agreement; or |
○ | to accept an RBA superior proposal, then RBA must pay the termination amount of $189 million in cash by wire transfer of immediately available funds to an account designated by IAA concurrently with such termination of the merger agreement; |
• | If IAA terminates the merger agreement: |
○ | due to an RBA change of recommendation, then RBA must pay the termination amount of $189 million in cash by wire transfer of immediately available funds to an account designated by IAA no later than three business days after such termination of the merger agreement; or |
○ | to accept an IAA superior proposal (as outlined above), then IAA must pay the termination amount of $189 million in cash by wire transfer of immediately available funds to an account designated by RBA concurrently with such termination of the merger agreement. |
• | RBA Proposal 1—RBA Share Issuance Proposal. To approve the issuance of RBA common shares to IAA securityholders in connection with the mergers; and |
• | RBA Proposal 2—RBA Adjournment Proposal. To approve the adjournment of the RBA special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the RBA special meeting to approve the RBA share issuance proposal. |
• | IAA Proposal 1—Adoption of the Merger Agreement: To adopt the merger agreement and thereby approve the transactions contemplated by the merger agreement, including the mergers; |
• | IAA Proposal 2—Advisory Non-Binding Vote on Merger-Related Compensation for Named Executive Officers: To approve, on a non-binding advisory basis, the compensation that may be paid or become payable to named executive officers of IAA that is based on or otherwise relates to the merger agreement and the transactions contemplated by the merger agreement; and |
• | IAA Proposal 3—Adjournment of the IAA Special Meeting: To approve the adjournment of the IAA special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the IAA special meeting to approve the IAA merger proposal. |
| | RBA Common Shares | | | IAA Common Stock | | | Implied Per Share Value of Merger Consideration | |
November 4, 2022 | | | $62.32 | | | $39.25 | | | $45.53(1) |
January 25, 2023 | | | $58.23 | | | $40.88 | | | $43.38 |
(1) | Pursuant to the merger agreement amendment, this implied per share value was calculated by adding (1) $12.80 to the product obtained by (2) multiplying the RBA common share closing price of $62.32 as of November 4, 2022 by an exchange ratio of 0.5252. |
• | the mergers being consummated as anticipated, at a certain time or at all; |
• | the benefits or opportunities the mergers will provide to RBA, IAA, RBA shareholders and IAA stockholders and the significance of such benefits and opportunities; |
• | the financial impact of the mergers on RBA’s financial position and results of operations; |
• | events that will take place or conditions that will exist if the mergers are not consummated; |
• | future announcements and filings; |
• | the special meetings, when the special meetings will be held and the format of such special meetings; |
• | the composition of the RBA board and management team following the consummation of the mergers; |
• | the tax consequences of the first or second merger or any other transaction contemplated by the merger agreement; |
• | the accounting treatment of the mergers, any transaction contemplated by the merger agreement or any assets of or any actions taken or not taken by RBA or IAA or any of their subsidiaries; |
• | the ability of the parties to obtain regulatory approvals for the mergers and the actions required to obtain such approvals; |
• | the amount of cash required to pay the merger consideration, related fees and transaction costs and the source of such funds; |
• | replacement of the RBA bridge loan with permanent financing; |
• | potential future dividend payments, including the special dividend to be paid to RBA shareholders in connection with the mergers; |
• | the number of RBA common shares to be issued in connection with the mergers and the relative ownership of RBA and IAA stockholders following the mergers; and |
• | the expectations of RBA and IAA with respect to the mergers as described in the sections entitled “The Mergers — RBA's Reasons for the Mergers and Recommendation of the RBA Board” and “The Mergers — IAA's Reasons for the Mergers and Recommendation of the IAA Board.” |
• | the possibility that RBA shareholders may not approve the issuance of new RBA common shares in connection with the mergers or that IAA stockholders may not approve the adoption of the merger agreement; |
• | the risk that a condition to closing of the mergers may not be satisfied (or waived), that either party may terminate the merger agreement or that the closing of the mergers might be delayed or not occur at all; |
• | risks relating to fluctuations of the market value of RBA’s and IAA’s common stock before the completion of the mergers, including as a result of uncertainty as to the long term value of the common stock of the combined company or as a result of general economic and market development conditions; |
• | the anticipated tax treatment of the mergers; |
• | potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the mergers; |
• | the diversion of management time on transaction-related issues; |
• | the response of competitors to the mergers; |
• | 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 effects of public comments on the transactions on market perceptions of the combined company’s future financial condition, results of operations, strategy and plans; |
• | the failure (or delay) to receive the required regulatory approvals of the mergers; |
• | the fact that operating costs and business disruption may be greater than expected following the public announcement or consummation of the mergers; |
• | the effect of the announcement, pendency or consummation of the mergers on the trading price of RBA common shares or IAA common stock; |
• | the ability of RBA and/or IAA to retain and hire key personnel and employees; |
• | the significant costs associated with the mergers; |
• | the outcome of any legal proceedings instituted against RBA, IAA and/or others relating to the mergers; |
• | restrictions during the pendency of the mergers 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 time frame 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 time frame expected or at all; |
• | changes in capital markets and the ability of the combined company to finance operations in the manner expected or to de-lever in the time frame expected; |
• | the failure of RBA or the combined company to meet financial and/or key performance indicator targets or goals; |
• | any legal impediment to the payment of the special dividend to be paid to RBA shareholders in connection with the mergers, 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, including, without limitation, fluctuations in the trading prices or trading multiples of RBA, IAA or the combined company; |
• | the evolving legal, regulatory and tax regimes under which RBA and IAA operate; and |
• | 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. |
• | each company may experience negative reactions from the financial markets, including negative impacts on its stock price or investor perceptions of each company’s board of directors, management and standalone prospects; |
• | each company may experience negative reactions from its customers, partners, suppliers and employees and other key business relations; |
• | each company will be required to pay its respective costs relating to the mergers, such as certain financial advisory, legal, accounting costs and associated fees and expenses, whether or not the mergers are completed; |
• | there may be disruptions to each company’s respective business resulting from the announcement and pendency of the mergers, and any adverse changes in their relationships with their respective customers (including insurance companies), partners, suppliers, vendors (including subhaulers), other business partners and employees may continue or intensify; |
• | each company may be subject to legal proceedings related to the failure to consummate the mergers; and |
• | each company will have committed substantial time and resources to matters relating to the mergers (including integration planning) which would otherwise have been devoted to day-to-day operations and other opportunities that may have been beneficial to either company as an independent company. |
• | delay or defer other decisions concerning RBA, IAA or the combined company, including entering into contracts with RBA or IAA or making other decisions concerning RBA or IAA or seek to change or cancel existing business relationships with RBA or IAA; or |
• | otherwise seek to change the terms on which they do business with RBA, IAA or the combined company. |
• | combining the companies’ operations and corporate functions; |
• | combining the businesses of RBA and IAA and meeting the capital requirements of the combined company in a manner that permits the combined company to achieve any revenue opportunities or operational scale efficiencies anticipated to result from the mergers, the failure of which would result in the anticipated benefits of the mergers not being realized in the time frame currently anticipated or at all; |
• | integrating and retaining personnel from the two companies; |
• | integrating the companies’ technologies; |
• | integrating and unifying each company’s intellectual property; |
• | integrating operating licenses across each company’s network of physical properties; |
• | identifying and eliminating redundant and underperforming functions and assets; |
• | harmonizing the companies’ operating practices, employee development and compensation programs, internal controls and other policies, procedures and processes; |
• | maintaining existing agreements with customers, business partners, suppliers, landlords and vendors, avoiding delays in entering into new agreements with prospective customers, business partners, suppliers, landlords and vendors, and leveraging relationships with such third parties for the benefit of the combined company; |
• | addressing possible differences in business backgrounds, corporate cultures and management philosophies; |
• | consolidating the companies’ administrative and information technology infrastructure; |
• | coordinating sales strategies and go-to-market efforts; |
• | coordinating geographically dispersed organizations; and |
• | effecting actions that may be required in connection with obtaining regulatory or other governmental approvals. |
• | increasing its vulnerability to changing economic, regulatory and industry conditions; |
• | limiting its ability to compete and its flexibility in planning for, or reacting to, changes in its business and the industry; |
• | limiting its ability to borrow additional funds; and |
• | increasing its interest expense and requiring it to dedicate a substantial portion of its cash flow from operations to payments on its debt, thereby reducing funds available for dividends, working capital, capital expenditures, acquisitions, share repurchases, and other purposes. |
• | the combined company’s prospective and existing customers may experience, or may continue to experience, slowdowns in their businesses, which in turn may result in reduced demand for the combined company platform, lengthening of sales cycles, loss of customers and difficulties in collections; |
• | the combined company’s suppliers may experience, or may continue to experience, disruptions in their supply chains, which may result in service interruptions or additional operating expenses, and may increase the price at which the combined company’s suppliers are willing to sell their products to us; |
• | the combined company’s return to work and remote working policies, which continue to evolve, may decrease employee productivity, collaboration and morale and may increase unwanted employee attrition; |
• | the combined company is expected to incur fixed costs, particularly for real estate, and may derive reduced benefit from those costs compared to what may have otherwise been possible; |
• | the combined company may experience disruptions to growth planning, such as for facilities and expansion of the business; |
• | the combined company may incur costs related to returning to work at its facilities, as well as costs associated with complying with new or evolving regulatory requirements, which may vary significantly depending on the jurisdiction; |
• | the combined company may be affected by an uncertain regulatory environment, and may be required to comply with cumbersome and conflicting federal, state and local laws regarding COVID-19, which may pose significant disruption to the combined company’s business operations, require significant management attention to respond to and enforce and result in an increased risk of non-compliance and claims; |
• | the combined company may be subject to legal liability for safe workplace claims; and |
• | the combined company’s critical suppliers or partners could go out of business. |
• | Proposal 1 – RBA share issuance proposal: To approve the issuance of RBA common shares to IAA securityholders in connection with the mergers; and |
• | Proposal 2 – RBA adjournment proposal: To approve the adjournment of the RBA special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes at the time of the RBA special meeting to approve the RBA share issuance proposal. |
• | Proposal 1: “FOR” the RBA share issuance proposal; and |
• | Proposal 2: “FOR” the RBA adjournment proposal. |
• | Internet: To vote via the internet, go to www.proxyvote.com to complete an electronic proxy card. RBA shareholders will be asked to provide the 16-digit control number from the WHITE proxy card they |
• | Telephone: To vote by telephone, dial 1-800-690-6903 (the call is toll-free in the United States and Canada; toll charges apply to calls from other countries) and follow the recorded instructions. Telephone voting is available 24 hours a day and will be accessible until 8:30 a.m., Pacific Time, on March 10, 2023. Easy-to-follow voice prompts will guide shareholders through the voting process and allow them to confirm that their instructions have been properly recorded. RBA shareholders who submit a proxy this way need not send in their proxy card by mail. |
• | Mail: To vote by mail using the WHITE proxy card (if the RBA shareholder requested paper copies of the proxy materials to be mailed to them), RBA shareholders should submit their proxy by properly completing, signing, dating and mailing their proxy card in the postage-paid envelope provided (if mailed in the United States or Canada). RBA shareholders who vote this way should mail the proxy card early enough so that it is received by 8:30 a.m., Pacific Time, on March 10, 2023 before the date of the RBA special meeting. |
• | Virtually via the RBA Special Meeting Website: To vote at the RBA special meeting, visit www.virtualshareholdermeeting.com/RBA2023SM, where RBA shareholders can virtually attend and vote at the RBA special meeting. RBA shareholders will be asked to provide the 16-digit control number from the WHITE proxy card they receive in order to access the RBA special meeting website. |
• | sending a written notice of revocation to the registered office of RBA, 9500 Glenlyon Parkway, Burnaby, British Columbia V5J 0C6, which must be received not less than 24 hours prior to their RBA common shares being voted at the RBA special meeting; |
• | properly submitting a new, later-dated proxy card, which must be received by 8:30 a.m., Pacific Time, on March 10, 2023 (in which case only the later-dated proxy is counted and the earlier proxy is revoked); |
• | submitting a proxy via the internet or by telephone at a later date, which must be received by 8:30 a.m., Pacific Time, on March 10, 2023 (in which case only the later-dated proxy is counted and the earlier proxy is revoked); or |
• | attending the RBA special meeting and voting virtually; attendance at the RBA special meeting will not, however, in and of itself, constitute a vote or revocation of a prior proxy. |
• | IAA Proposal 1—Adoption of the Merger Agreement: To adopt the merger agreement and thereby approve the transactions contemplated by the merger agreement (as amended or modified), including the mergers; |
• | IAA Proposal 2—Advisory Non-Binding Vote on Merger-Related Compensation for Named Executive Officers: To approve, on a non-binding advisory basis, the compensation that may be paid or become payable to the named executive officers of IAA that is based on or otherwise relates to the merger agreement (as amended or modified) and the transactions contemplated by the merger agreement (as amended or modified); and |
• | IAA Proposal 3—Adjournment of the IAA special meeting: To approve the adjournment of the IAA special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the IAA special meeting to approve the IAA merger proposal. |
• | “FOR” the IAA merger proposal, |
• | “FOR” the IAA compensation proposal, and |
• | “FOR” the IAA adjournment proposal. |
Proposal | | | Vote Required | | | Effects of Certain Actions |
IAA Proposal 1: the IAA merger proposal | | | Approval requires the affirmative vote of the holders of a majority of the outstanding shares of IAA common stock entitled to vote thereon at the close of business on the IAA record date. | | | The failure to vote, the failure to instruct your bank, broker or nominee to vote shares held in “street name” in favor of the IAA merger proposal or an abstention from voting will have the same effect as a vote “AGAINST” the IAA merger proposal. |
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IAA Proposal 2: the IAA compensation proposal | | | Approval requires the affirmative vote of the holders of a majority of the shares of IAA common stock present at the IAA special meeting in person (including virtually) or represented by proxy and entitled to vote thereon. | | | An abstention on the IAA compensation proposal will have the same effect as a vote “AGAINST” the IAA compensation proposal. Any shares not present at the IAA special meeting (including due to the failure of an IAA stockholder who holds shares in “street name” through a bank, broker or other nominee to provide voting instructions with respect to any proposals at the IAA special meeting to such bank, broker or other nominee) will have no effect on the outcome of the IAA compensation proposal, so long as a quorum is otherwise present. |
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IAA Proposal 3: the IAA adjournment proposal | | | Approval requires the affirmative vote of the holders of a majority of the shares of IAA common stock present at the IAA special meeting in person (including virtually) or represented by proxy and entitled to vote thereon. | | | An abstention on the IAA adjournment proposal will have the same effect as a vote “AGAINST” the IAA adjournment proposal. Any shares not present at the IAA special meeting (including due to the failure of an IAA stockholder who holds shares in “street name” through a bank, broker or other nominee to provide voting instructions with respect to any proposals at the IAA special meeting to such bank, broker or other nominee) will have no effect on the outcome of the IAA adjournment proposal, so long as a quorum is otherwise present. |
• | By Internet Before the IAA Special Meeting: To vote via the internet, IAA stockholders should go to the website listed on their enclosed proxy card and follow the instructions to complete an electronic proxy card. IAA stockholders will be asked to provide their control number included with their proxy materials. Internet voting for IAA stockholders will be available 24 hours a day. An IAA stockholder’s votes must be received before the polls close at the IAA special to be counted. If an IAA stockholder votes via the internet, they do not need to return a proxy card by mail; |
• | By Telephone: To vote via telephone, dial the toll-free telephone number shown on your proxy card. IAA stockholders will be asked to provide the control number included with their proxy materials. Telephone voting for IAA stockholders will be available 24 hours a day. An IAA stockholder’s votes must be received before the polls close at the IAA special meeting to be counted. If an IAA stockholder votes via telephone, they do not need to return a proxy card by mail; |
• | By Mail: To vote by mail using the enclosed proxy card, IAA stockholders need to complete, sign and date the proxy card and return it promptly by mail using the enclosed, preaddressed, postage paid envelope so that it is received before the IAA special meeting. The persons named in the proxy card will vote the shares you own in accordance with your instructions on the proxy card you mail; or |
• | Virtually via the IAA Special Meeting Website: To attend the IAA special meeting, IAA stockholders will need to pre-register for the IAA special meeting before the polls close at the IAA special meeting. IAA stockholders should have their proxy card, or voting instruction form, containing their control number available and follow the instructions to complete their registration request. After registering, stockholders will receive a confirmation email with a link and instructions for accessing the IAA special meeting. IAA stockholders should verify that they have received the confirmation email in advance of the IAA special meeting, including the possibility that it may be in your spam or junk folder. IAA stockholders must |
• | by sending a signed written notice of revocation to IAA’s Corporate Secretary, at the address below, which must be received not less than 24 hours prior to the time that such proxies are exercised and shares are voted at the IAA special meeting; |
• | by submitting a validly executed proxy card with a later date either by mail, via the internet or by telephone that is received by IAA’s Secretary before the polls close at the IAA special meeting; or |
• | by virtually attending the IAA special meeting and voting or requesting that your proxy be revoked at the IAA special meeting via the IAA special meeting website as described above. |
• | the expectation that the transaction will create a leading omnichannel marketplace for buyers and sellers across a diverse portfolio of verticals with a combined gross transaction value in excess of $14.5 billion (based on gross transaction value for the last twelve months ended September 30, 2022); |
• | the belief that IAA’s business model is highly complementary to RBA’s marketplace, with the salvage auction process closely resembling RBA’s used equipment auction process; |
• | the belief that diversifying both companies’ end market exposures is likely to enhance the growth profile of the combined company, while simultaneously reducing cyclicality given the historically counter-cyclical and resilient salvage vehicle sector; |
• | the expectation that RBA’s highly expandable platform will benefit from greater transaction volume and higher margin service attach rates; |
• | the expectation that the approximately 275 combined yards of RBA and IAA will enhance each organization’s growth strategy, whereby: |
○ | RBA is expected to benefit from the acceleration of its local yard strategy to unlock new customers and drive incremental gross transaction value and the improvement of yard unit economics through higher and more consistent yard utilization; and |
○ | IAA is expected to benefit from increased catastrophic events capacity for insurance customers via RBA’s expansive yards and an international footprint with auction yards in eleven countries outside of the U.S.; |
• | the expectation that the expanded marketplace of the combined company will also lead to increased footprint/customer proximity, enhanced yard utilization and automation, and improved return on investment on technology investments; |
• | the belief that the combination will drive enhanced customer experience and engagement by merging aligned customer-centric cultures supported by comprehensive tech-enabled solutions; |
• | the expectation that the combined company will be able to achieve at least $100-120 million in annual run-rate cost synergies by the end of 2025; |
• | the expectation that the transaction will be accretive to (i) RBA’s Adjusted EBITDA margins when considering the run-rate cost synergies (based on financials for the last twelve months period ended September 30, 2022) and (ii) RBA’s adjusted earnings per share when considering the realizable cost synergies, as each such metric is reported by RBA; |
• | the expectation that the combination of RBA and IAA will provide significant revenue growth opportunities for the combined company, beyond the identified cost synergies, to accelerate the revenue growth otherwise achievable by RBA and IAA on a standalone basis, including through cross-selling opportunities, accelerated marketplace innovation, and acceleration of IAA’s international expansion; |
• | the expectation that the cash flow of the combined company will enable RBA to de-leverage while providing capital allocation flexibility; |
• | the relevant automotive sector expertise of RBA’s management team and their experience in successfully integrating acquisitions; |
• | the fact that, upon completion of the mergers, existing RBA shareholders will continue to own in excess of a majority of the outstanding RBA shares on a fully diluted basis with the opportunity to share in any future price appreciation of, and dividends declared on, RBA common shares; |
• | the oral opinions rendered by Goldman Sachs, subsequently confirmed in writing dated as of each of November 7, 2022 and January 22, 2023, to the RBA board that, as of each such date and based upon and subject to the factors and assumptions set forth therein, the merger consideration to be paid by RBA for each share of IAA common stock pursuant to the original merger agreement (as amended by the merger agreement amendment with respect to the January 22, 2023 opinion) was fair from a financial point of view to RBA. See the section entitled “— Opinions of RBA’s Financial Advisor” and Annex D; |
• | the oral opinions rendered by Guggenheim Securities, subsequently confirmed in writing dated as of each of November 6, 2022 and January 22, 2023, to the RBA board that, as of each such date and based upon and subject to the factors and assumptions set forth therein, the merger consideration to be paid by RBA for each share of IAA common stock pursuant to the original merger agreement (as amended by the merger agreement amendment with respect to the January 22, 2023 opinion) was fair from a financial point of view to RBA. See the section entitled “—Opinions of RBA’s Financial Advisor” and Annex E; |
• | the likelihood that the mergers would be consummated, including, among other things, the limited conditions set forth in the merger agreement and the probability that regulatory approvals for the mergers would be obtained in a timely manner without the imposition of any conditions that RBA would find unacceptable; and |
• | other terms of the merger agreement, including, among other things: |
○ | the fact that the exchange ratio is fixed and will not be adjusted to compensate for any decrease in the trading price of RBA’s common shares prior to the completion of the mergers, which provides certainty to RBA shareholders as to their pro forma percentage ownership of the combined company immediately after the completion of the mergers; |
○ | the extensive representations and warranties made by IAA in the merger agreement, as well as the covenants in the merger agreement relating to the conduct of IAA’s business during the period from the date of the original merger agreement through the effective time; |
○ | that the RBA share issuance is subject to approval by holders of RBA common shares, and that no termination fee is payable by RBA if its shareholders do not vote to approve the RBA share issuance |
○ | RBA’s ability, under certain circumstances prior to receipt of the requisite approval of the RBA shareholders, to consider and respond to an unsolicited alternative acquisition proposal, to furnish information to the person making such a proposal, and to engage in discussions or negotiations with the person making such a proposal; |
○ | the RBA board’s ability, under certain circumstances prior to receipt of the requisite approval of the RBA shareholders, to effect a RBA change of recommendation, including to withdraw, qualify or modify the RBA board’s recommendation in favor of the RBA share issuance proposal; |
○ | the RBA board’s ability, under certain circumstances prior to receipt of the requisite approval of the RBA shareholders, to terminate the merger agreement in order to enter into an alternative acquisition agreement providing for a superior proposal, subject to payment to IAA of a termination fee of $189 million; |
○ | that IAA, subject to certain exceptions, is prohibited from soliciting or engaging in discussions or entering into agreements with respect to alternative acquisition proposals; and |
○ | with respect to the merger agreement amendment, the feedback received from RBA shareholders regarding the mergers, and the benefits to RBA shareholders of (i) the decrease in the exchange ratio from 0.5804 to 0.5252, resulting in less dilution to RBA shareholders as a result of the mergers, and (ii) the ability of RBA to pay the special dividend in connection with the mergers to pre-closing RBA shareholders contingent upon the closing of the first merger. |
• | the risk that IAA’s financial performance may not meet RBA’s expectations; |
• | the risk that the anticipated benefits to RBA and IAA following completion of the combination, including the cost synergies and revenue growth opportunities described above, will not be realized, will cost more to realize, or will take longer to realize than expected; |
• | the risk that IAA may not be able to maintain or renew certain material contracts and relationships on favorable terms or at all; |
• | the possible disruption of RBA’s and IAA’s respective operations that may result from the combination, including the potential for diversion of management and employee attention from other strategic opportunities or operational matters, and the potential effect of the combination on RBA’s and IAA’s respective businesses, operating results and relations with business partners, suppliers and other parties; |
• | the difficulties and challenges inherent in completing the combination and integrating the businesses, operations and workforces of RBA and IAA; |
• | the risk that, because the exchange ratio under the merger agreement would not be adjusted for changes in the market price of RBA common shares or IAA common stock, the then-current trading price of the RBA common shares to be issued to holders of shares of IAA common stock upon the consummation of the mergers could be significantly higher than the trading price prevailing at the time the merger agreement was executed; |
• | the fact that RBA’s current shareholders will have reduced ownership and voting interests after the completion of the combination (compared to their current ownership and voting interests in RBA) and will exercise less influence over the RBA board and management and policies of RBA (compared to their current influence over the RBA board and management and policies of RBA); |
• | the possibility that the mergers may not be completed, including as a result of the failure to obtain the requisite shareholder or regulatory approvals, or that completion may be unduly delayed; |
• | the risk that governmental entities may impose conditions on the combined company that may adversely affect the ability of the combined company to realize the expected benefits of the transactions; |
• | the fact that IAA’s obligation to complete the mergers is conditioned on its receipt of a tax opinion from Cooley; |
• | the fact that RBA will have higher leverage following the transactions due to its incurrence of indebtedness in order to fund the cash portion of the merger consideration and repay certain indebtedness in connection with the mergers, which could have adverse consequences to RBA’s business and financial position or its ability to pursue acquisition opportunities following the mergers; |
• | the significant costs incurred by RBA in connection with negotiating and entering into the merger agreement, which, if the transactions are not consummated, will generally be borne by RBA; |
• | the fact that the separate opinions of each of Goldman Sachs and Guggenheim Securities to the RBA board that, as of the date thereof and based upon and subject to the factors and assumptions set forth therein, the merger consideration to be paid by RBA for each share of IAA common stock pursuant to the merger agreement was fair from a financial point of view to RBA, speak only as of the date of delivery and do not take into account events occurring or information that has become available after such date, including any changes in the operations and prospects of RBA or IAA, general market and economic conditions and other factors which may be beyond the control of RBA and IAA and on which the fairness opinions were based; |
• | the fact that in certain circumstances, including if RBA terminates the merger agreement to accept a superior proposal or if IAA terminates the merger agreement as a result of the RBA board changing its recommendation in favor of the RBA share issuance, RBA would be required to pay IAA a termination amount of $189 million; |
• | the risk of litigation in connection with the mergers; |
• | that provisions in the merger agreement placing certain restrictions on the operation of RBA’s business during the period between the signing of the merger agreement and consummation of the mergers may delay or prevent RBA from pursuing business opportunities that may arise or other actions it would otherwise take with respect to its operations; |
• | the increase in the aggregate cash consideration payable to IAA stockholders pursuant to the terms of the merger agreement amendment; and |
• | various other risks associated with the transactions and the businesses of RBA, IAA and the combined company described in the section entitled “Risk Factors.” |
• | the implied value of the merger consideration to be received by IAA stockholders in the transactions of 0.5252 RBA common shares and $12.80 cash per share of IAA common stock which, using RBA’s 10-day volume-weighted average price on the NYSE as of January 20, 2023 of $59.3581, equals a purchase price of $44.40 per share, which represents a premium of: |
○ | 13.1% to the closing price of IAA common stock on November 4, 2022, the last trading day prior to the initial public announcement of the merger agreement and the transactions; |
○ | 34.5% to the closing price of IAA common stock on October 3, 2022, the last trading day before the IAA board agreed in principle to the initial $46.88 headline price; and |
○ | 9.2% to the closing price of IAA common stock on January 20, 2023, the last trading day before the initial public announcement of the merger agreement amendment; |
• | the possibility that the trading price of IAA common stock on the NYSE, absent the transactions, would not reach and sustain at least the level implied by the merger consideration in the near term, or at all; |
• | the fact that the receipt of RBA common shares as merger consideration provides IAA stockholders with an approximately 37.2% ownership interest in the combined company and the opportunity to share in any future price appreciation of, and dividends declared on, RBA common shares, and that the transactions are expected to provide a number of significant strategic opportunities and benefits to the combined company to support such appreciation, including the following: |
○ | the transactions combine two independent, strong companies and complementary business models across near-adjacent verticals with significant synergy potential, and positions the combined company to significantly expand and enhance growth for both RBA and IAA; |
○ | the parties expect (1) to achieve $100 million – $120+ million in annual run-rate cost synergies by the end of 2025, (2) that certain revenue opportunities will also be available, including growing IAA sales |
○ | IAA will benefit from the experience, talent, technology and industry relationships of RBA, with a more diversified customer base across a broad set of attractive end-markets, as well as stronger data analytics capabilities, creating an even stronger organization; |
○ | the combination is expected to enable (1) IAA to expand its global digital marketplace technology, further strengthen its operating model, and expand into additional supply categories as well as new geographies, (2) RBA to enter the adjacent, high-growth automotive sector and increase the efficiency of certain processes using IAA technology, and (3) the combined company to capitalize on new revenue opportunities; |
○ | the combined company will be able to provide both companies’ customers with multiple selling options, a comprehensive suite of technology-enabled services and enhanced insights, allowing them to maximize the return of their commercial and automotive assets; |
○ | the combined company will afford both IAA and RBA a footprint closer to both companies’ customers, enabling the combined company to offer faster service and a greatly improved, seamless experience while providing access to more real estate and increased flexibility to drive low-cost growth; |
○ | the expected ability of the combined company to quickly de-leverage following the closing of the transactions and, in the case of the merger agreement amendment, the fact that the merger agreement amendment and related transactions were leverage neutral relative to the transactions as initially announced; and |
○ | RBA’s expectation that it will maintain its current quarterly dividend and may consider further increases following closing as the combined company de-levers its balance sheet; |
• | the fact that the cash component of the merger consideration, including the increased cash consideration provided by the merger agreement amendment, would provide immediate liquidity and certainty of value to IAA stockholders; |
• | the benefits that IAA was able to obtain as a result of negotiations with RBA, in the case of the original merger agreement, despite the macroeconomic and financing environment worsening and IAA revising down its near term standalone outlook over the course of negotiations, including: |
○ | an increase in the price RBA was willing to offer to acquire IAA in the original merger agreement from an initial headline value of $46.00 per share of IAA stock to the final proposal of $46.88 per IAA share, and the IAA board’s belief that this was the highest price per share that RBA was willing to pay; and |
○ | in the case of the merger agreement amendment, that the $2.80 per share of increased cash consideration would provide immediate liquidity and certainty of value to IAA stockholders and that the IAA board was unwilling to accept any revised transaction structure that resulted in more than a modest total implied value decrease in the merger consideration; |
• | the potential strategic alternatives available to IAA, taking into account the covenants imposed by the non-compete agreement with KAR, and the risks and costs associated with pursuing those potential alternatives, including the possibility of remaining a standalone company and the anticipated value that IAA’s standalone plan and prospects would deliver to IAA stockholders relative to the risk adjusted value associated with the transactions; |
• | the IAA board’s consistent assessment, taking into account discussions with representatives of J.P. Morgan, and the fact that IAA received no inbound interest from potential third parties after Ancora publicly called for the IAA board to initiate a sale process in March 2022 that it was unlikely that a third party would engage in a transaction with IAA at the same or better price and other terms offered by RBA and that the |
• | in the case of the merger agreement amendment, the IAA board’s assessment, in consultation with its advisors, that entering into the amendment and the cooperation agreement and consenting to the Starboard investment would (1) increase the likelihood of the transactions being consummated, including given the voting commitment entered into by Ancora, a holder of approximately 4% of IAA’s voting power, (2) also benefit the combined company following closing, including due to the participation of Jeffrey Smith and Timothy O’Day on the combined company board, delivering enhanced value that would accrue in part to former IAA stockholders, and (3) deliver superior risk adjusted value to IAA and its stockholders than IAA’s standalone prospects or the terms of the original merger agreement; |
• | the result of IAA’s due diligence investigation of RBA and the synergies expected to be generated by the transactions, conducted with the assistance of IAA’s external advisors, including IAA’s assessment of RBA’s standalone plan and prospects; |
• | the experience, strong industry relationships, reputation and extensive track record of RBA and its management, including RBA’s track record of successfully integrating past acquisitions; |
• | the oral opinions rendered by J.P. Morgan, financial advisor to IAA, to the IAA board on each of January 22, 2023 and November 6, 2022, in each case subsequently confirmed by delivery of a written opinion, dated as of January 22, 2023 and November 6, 2022, respectively, that as of each such date and based upon and subject to the factors and assumptions set forth in its opinion, the merger consideration to be paid to the IAA stockholders in the mergers was fair, from a financial point of view, to such holders, and that, in the case of the January 22, 2023 opinion, J.P. Morgan’s opinion took into account the special dividend and the Starboard investment in addition to the changes to the merger consideration. See the section entitled “— Opinion of IAA’s Financial Advisor” and Annex F; |
• | the expectation that, for IAA stockholders that are U.S. holders, the mergers will qualify as a “reorganization” under the Code and, as a result, the receipt of the merger consideration by such holders will not result in the realization of a gain other than with respect to the cash component thereof; |
• | the IAA board’s assessment that RBA had demonstrated that it valued the IAA workforce and was carefully considering how to best retain and integrate the IAA workforce into its own; |
• | the fact that the parties expect to retain IAA’s Westchester, Illinois offices as the global headquarters of the combined company; |
• | the likelihood that the mergers would be consummated and anticipated timing of closing based on, among other things: |
○ | the limited scope of the conditions to closing included in the merger agreement, including that no financing conditions are included; |
○ | the level of RBA’s commitment to satisfy the conditions to closing, and the assessment of the IAA board, after considering the perspectives of its legal advisors, regarding the likelihood of such closing conditions being satisfied; |
○ | the fact that RBA obtained committed debt financing from reputable financing sources with limited and customary conditionality to funding; |
○ | the scope of the effects, changes and developments that may be considered in determining whether a material adverse effect has occurred under the merger agreement and the customary exceptions therefrom that were negotiated by IAA; |
○ | in the case of the merger agreement amendment, the fact that all required regulatory approvals for the transactions have been obtained; and |
○ | that IAA is entitled to specific performance of RBA’s obligations under the merger agreement, including the obligation to close the transactions (subject to the satisfaction or waiver of closing conditions). |
• | other terms of the merger agreement, including, among other things: |
○ | IAA’s right to designate four directors to serve on the RBA board effective as of immediately following the closing of the transactions, the ability of these designees to oversee the integration of the companies and realization of synergies from the transactions and the fact that Timothy O’Day, a seasoned industry professional, will be one of IAA’s designees and is expected to be a strong advocate for shareholder interests; |
○ | that the merger agreement is subject to approval by holders of at least the majority of the outstanding shares of IAA common stock, and that no termination fee or expense reimbursement is payable by IAA if its stockholders do not vote to adopt the merger agreement at the IAA stockholders meeting, other than, among other circumstances, if the IAA board makes an IAA change of recommendation or in specified circumstances following a third party making an acquisition proposal for IAA, as described in the section entitled “The Merger Agreement — Termination Amount and Expenses;” |
○ | IAA’s ability, prior to receipt of the requisite approval of the IAA stockholders under certain circumstances, to consider and respond to an unsolicited alternative acquisition proposal, to furnish information to the person making such a proposal and to engage in discussions or negotiations with the person making such a proposal; |
○ | the IAA board’s ability, under certain circumstances prior to receipt of the requisite approval of the IAA stockholders, to effect an IAA change of recommendation, including to withdraw, qualify or modify the IAA board’s recommendation in favor of the merger proposal or to approve or recommend an alternative acquisition proposal; |
○ | the IAA board’s ability, under certain circumstances prior to receipt of the requisite approval of the IAA stockholders, to terminate the merger agreement in order to enter into an alternative acquisition agreement providing for a superior proposal, subject to payment to RBA of a termination fee of $189 million; |
○ | the IAA board’s assessment, after considering the advice of its financial and legal advisors, that the termination fee of $189 million would not present a meaningful deterrent to a third party from making or consummating an alternative acquisition proposal for IAA; |
○ | that, pursuant to the merger agreement amendment, RBA agreed to reimburse IAA for up to $5 million of its transaction related expenses in the event that the merger agreement is terminated as a result of RBA’s failure to obtain the approval of its shareholders at the RBA special meeting; and |
○ | that RBA is subject to restrictions on its activities prior to closing, including its ability to take actions outside of the ordinary course of business or, subject to certain exceptions, to solicit or engage in discussions or enter into agreements with respect to alternative acquisition proposals. |
• | the potential upside in IAA’s standalone strategic plan; |
• | that former IAA stockholders are expected to own less than a majority of the outstanding RBA shares, and IAA’s designees will constitute four out of the twelve directors on the board of directors of the combined company, and accordingly, after the consummation of the transactions will have less ability to directly influence RBA’s corporate affairs; |
• | the risk that RBA shareholders and IAA stockholders may not support the revised transaction, including as a result of the changes to the consideration mix, the reduction in the total implied consideration value, or the terms of the Starboard investment; |
• | the risk that the cost savings, cost synergies, revenue opportunities and other benefits to the IAA stockholders expected to result from the transactions might not be fully realized or will cost more to achieve than anticipated; |
• | the risk that a different strategic alternative potentially could be more beneficial to IAA stockholders than the transactions; |
• | the risk that the provisions of the merger agreement that restrict IAA’s ability to solicit, participate in, facilitate, discuss, negotiate or furnish information in connection with alternative acquisition proposals, subject to certain exceptions, would dissuade third parties from making or consummating an alternative acquisition proposal for IAA, including that: |
○ | IAA will be required to afford RBA certain match rights prior to the IAA board being able to make an IAA change of recommendation to accept a superior proposal (as defined in the section entitled “The Merger Agreement—IAA Change of Recommendation”); |
○ | RBA will be entitled to the termination fee of $189 million in specified circumstances, including if IAA terminates the merger agreement to accept a superior proposal, the IAA board makes an IAA change of recommendation or the fee tail is triggered (see the section entitled “The Merger Agreement—Termination of the Merger Agreement”); |
• | the significant costs incurred by IAA in connection with negotiating and entering into the merger agreement, which, if the transactions are not consummated, will generally be borne by IAA; |
• | that RBA obtaining the requisite approvals of RBA’s shareholders at the RBA special meeting is a condition to the consummation of the transactions and the related risks that such approvals are not obtained, including as a result of Luxor’s public opposition to the transactions; |
• | in the case of the merger agreement amendment, (1) the risk that RBA shareholders and IAA stockholders may not support the revised transaction, (2) the fact that one of IAA’s four designees to the combined company board will not come from the existing IAA board and as a result may not have the same level of familiarity with IAA’s current business and operations, (3) the risk that the transactions would not be consummated despite the revisions to the transactions and (4) the risk that the revised transactions would increase the risk of litigation challenging the transactions; |
• | that RBA has the benefit of exceptions to the non-solicitation covenants applicable to it and its representatives under the merger agreement reciprocal to the exceptions afforded to IAA, including the ability in certain circumstances to effect an RBA change in recommendation or terminate the merger agreement to accept a superior proposal of a termination fee, subject to payment to IAA of $189 million; |
• | the risk that the fifteen consecutive business day marketing period that RBA must be afforded before it can be required to consummate the transactions could meaningfully delay the consummation of the transactions which the IAA board no longer considered a significant risk at the time of entry into the merger agreement amendment; |
• | that the announcement or pendency of the transactions may impede IAA’s ability to retain and hire key personnel and its ability to maintain relationships with its customers, suppliers, vendors, landlords and other business partners or negatively impact its operating results and business generally; |
• | that matters relating to the transactions, including integration planning, may require substantial commitments of time and resources by IAA’s management and employees and may divert the attention of management and employees, which may affect IAA’s business operations; |
• | the risks and challenges inherent in the combination of two businesses, including the potential for unforeseen difficulties in integrating operations; |
• | that, if the transactions are completed, the mergers will bind all IAA stockholders, including those who did not vote to adopt the merger agreement at the IAA stockholders meeting, subject to any appraisal rights under the DGCL; |
• | the risk of litigation in connection with the transactions; |
• | the risk that governmental entities may impose conditions on the combined company that may adversely affect the ability of the combined company to realize the expected benefits of the transactions, which in the case of the merger agreement amendment was mitigated because all required regulatory approvals have been obtained; |
• | that provisions in the merger agreement placing certain restrictions on the operation of IAA’s business during the period between the signing of the merger agreement and consummation of the transactions may delay or prevent IAA from pursuing business opportunities that may arise or other actions it would otherwise take with respect to its operations; |
• | that IAA and RBA may be obligated to complete the transactions without having obtained appropriate consents, approvals or waivers from the counterparties under certain of IAA’s contracts that require consent or approval to consummate the transactions, and the risk that such consummation could trigger the termination of, or default under, such contracts or the exercise of rights by the counterparties under such contracts; and |
• | various other risks associated with the transactions and the businesses of IAA, RBA and the combined company described in the section entitled “Risk Factors.” |
• | the merger agreement; |
• | annual reports to shareholders and Annual Reports on Form 10-K of RBA and IAA for the five fiscal years ended December 31, 2021 and for the three fiscal years ended January 2, 2022, respectively; |
• | the information statement of KAR, dated June 14, 2019, pursuant to which KAR spun off IAA; |
• | certain interim reports to shareholders and Quarterly Reports on Form 10-Q of RBA and IAA; |
• | certain publicly available research analyst reports of RBA and IAA; |
• | certain other communications from RBA, and IAA to their respective shareholders; |
• | certain publicly available research analyst reports for RBA and IAA; |
• | certain internal financial analyses and forecasts for IAA prepared by its management; and |
• | certain internal financial analyses and forecasts for RBA, standalone and pro forma for the mergers, and certain financial analyses and forecasts for IAA, in each case, as prepared by the management of RBA and approved for Goldman Sachs’ use by RBA (the “RBA forecasts”), including certain operating synergies projected by the management of RBA to result from the mergers, as approved for Goldman Sachs’ use by RBA (the “RBA synergies”). See the section entitled “—Certain RBA Financial Forecasts.” |
• | a premium of 12.3% based on the undisturbed closing price per share of IAA common stock on November 4, 2022 of $39.25; |
• | a premium of 8.4% based on the closing price per share of IAA common stock on January 20, 2023 of $40.65; |
• | a discount of 1.9% based on the implied value of the previously announced transaction of $44.92; |
• | a discount of 6.4% based on the highest closing price per share of IAA common stock during the 52-week period ended January 20, 2023 of $47.08. |
• | was provided to the RBA board (in its capacity as such) for its information and assistance in connection with its evaluation of the merger consideration; |
• | did not constitute a recommendation to the RBA board with respect to the mergers; |
• | does not constitute advice or a recommendation to any holder of RBA common shares as to how to vote or act in connection with the mergers or otherwise described in the merger agreement; |
• | did not address RBA’s underlying business or financial decision to pursue or effect the mergers, the relative merits of the mergers as compared to any alternative business or financial strategies that might exist for RBA or the effects of any other transaction in which RBA might engage; |
• | addressed only the fairness, from a financial point of view and as of the date of such opinion, of the merger consideration; |
• | expressed no view or opinion as to (i) any other term, aspect or implication of (a) the mergers (including, without limitation, the form or structure of the mergers) or the merger agreement or (b) any other agreement, transaction document or instrument contemplated by the merger agreement or to be entered into or amended in connection with the mergers or (ii) the fairness, financial or otherwise, of the mergers to, or of any consideration to be paid to or received by, the holders of any class of securities, creditors or other constituencies of RBA; and |
• | expressed no view or opinion as to the fairness, financial or otherwise, of the amount or nature of any compensation payable to or to be received by any of RBA’s or IAA’s directors, officers or employees, or any class of such persons, in connection with the mergers relative to the merger consideration or otherwise. |
• | Reviewed the original merger agreement; |
• | Reviewed a draft of the merger agreement amendment, dated January 22, 2023; |
• | Reviewed certain non-public business and financial information regarding RBA’s and IAA’s respective businesses and future prospects (including certain financial projections for RBA for the period beginning September 30, 2022 and ending December 31, 2026 and for IAA for period beginning September 30, 2022 and ending December 31, 2026 (together, the “parent-provided financial projections”) and certain other estimates and other forward-looking information), all as prepared and approved for Guggenheim Securities’ use by RBA (collectively with the synergy estimates (as defined below), the “parent-provided information”) (see the section entitled “—Certain RBA Financial Forecasts”); |
• | Reviewed certain non-public business and financial information regarding IAA’s business and future prospects (including certain financial projections for IAA on a stand-alone basis for the period beginning October 2, 2022 and ending December 31, 2026 (the “IAA-provided financial projections” and, together with the parent-provided financial projections, the “financial projections”) and certain other estimates and other forward-looking information), all as prepared by IAA’s senior management and reviewed by, discussed with and approved for Guggenheim Securities’ use by RBA (collectively, the “IAA-provided information”) (see the section entitled “—Certain RBA Financial Forecasts”); |
• | Reviewed certain estimated operating and financial synergies expected to result from the mergers and estimated costs to achieve the same (collectively, the “synergy estimates” or the “synergies”), all as prepared and approved for Guggenheim Securities’ use by RBA, and discussed with RBA’s and IAA’s senior management (see the section entitled “—Certain RBA Financial Forecasts”); |
• | Discussed with RBA’s senior management their strategic and financial rationale for the mergers as well as their views of RBA’s and IAA’s respective businesses, operations, historical and projected financial results and future prospects and the commercial, competitive and regulatory dynamics in their respective sectors; |
• | Discussed with IAA’s senior management their views of IAA’s business, operations, historical and projected financial results and future prospects and the commercial, competitive and regulatory dynamics in the auto salvage sector; |
• | Performed discounted cash flow analyses based on the parent-provided financial projections, IAA-provided financial projections and the synergy estimates; |
• | Reviewed the valuation and financial metrics of certain mergers and acquisitions that Guggenheim Securities deemed relevant in evaluating the mergers; |
• | Reviewed the historical prices, trading multiples and trading activity of RBA common shares and shares of IAA common stock; |
• | Compared the financial performance of RBA and IAA and the trading multiples and trading activity of RBA common shares and shares IAA common stock with corresponding data for certain other publicly traded companies that Guggenheim Securities deemed relevant in evaluating RBA and IAA; |
• | Reviewed the pro forma financial results, financial condition and capitalization of RBA giving effect to the mergers; and |
• | Conducted such other studies, analyses, inquiries and investigations as Guggenheim Securities deemed appropriate. |
• | It has relied upon and assumed the accuracy, completeness and reasonableness of all industry, business, financial, legal, regulatory, tax, accounting, actuarial and other information provided by or discussed with RBA or IAA (including, without limitation, the parent-provided information, the IAA-provided information and the synergies estimates) or obtained from public sources, data suppliers and other third parties. |
• | It (i) does not assume any responsibility, obligation or liability for the accuracy, completeness, reasonableness, achievability or independent verification of, and it has not independently verified, any such information (including, without limitation, the parent-provided information, the IAA-provided information and the synergies estimates), (ii) expresses no view or opinion regarding the reasonableness or achievability of the financial projections, the synergy estimates, any other estimates and any other forward-looking information provided by RBA or IAA or the assumptions upon which any of the foregoing are based and (iii) has relied upon the assurances of RBA’s senior management that they are (in the case of the |
• | Specifically, with respect to (i) the parent-provided financial projections and the synergy estimates utilized in Guggenheim Securities’ analyses, Guggenheim Securities (a) has been advised by RBA’s senior management, and it has assumed, that the parent-provided financial projections and the synergy estimates have been reasonably prepared on bases reflecting the best then-currently available estimates and judgments of RBA’s senior management as to the expected future performance of RBA on a stand-alone basis and pro forma for the mergers and the expected amounts and realization of the synergies and (b) has assumed that the parent-provided financial projections and the synergy estimates have been reviewed by the RBA board with the understanding that such information will be used and relied upon by Guggenheim Securities in connection with rendering Guggenheim Securities’ opinion, (ii) the IAA-provided financial projections and synergies estimates utilized in Guggenheim Securities’ analyses, Guggenheim Securities has assumed that such financial projections have been reasonably prepared on bases reflecting the best then-currently available estimates and judgments of IAA’s senior management as to the expected future performance of IAA on a stand-alone basis and the expected amounts and realization of the synergies and (iii) any financial projections/forecasts, any other estimates and/or any other forward-looking information obtained by Guggenheim Securities from public sources, data suppliers and other third parties, Guggenheim Securities has assumed that such information is reasonable and reliable. |
• | As the RBA board is aware, Guggenheim Securities previously rendered an opinion, dated as of November 7, 2022 (the “original opinion”), as to the fairness, from a financial point of view, of the merger consideration contemplated by the original merger agreement. The original opinion was based on, among other things, various financial analyses that were predicated on certain financial projections and forecasts for RBA and IAA for the fiscal years 2022 through 2026 (the “original financial forecasts”). Guggenheim Securities' have been advised by the RBA board and senior management to rely exclusively on the original financial forecasts for purposes of Guggenheim Securities' analyses and opinion. |
• | Guggenheim Securities did not perform or obtain any independent appraisal of the assets or liabilities (including any contingent, derivative or off-balance sheet assets and liabilities) of RBA, IAA, or any other entity or the solvency or fair value of RBA, IAA, or any other entity, nor was Guggenheim Securities furnished with any such appraisals. |
• | Guggenheim Securities’ professionals are not legal, regulatory, tax, consulting, accounting, appraisal or actuarial experts and Guggenheim Securities’ opinion should not be construed as constituting advice with respect to such matters; accordingly, Guggenheim Securities relied on the assessments of RBA’s senior management, IAA’s senior management, and RBA’s and IAA’s other professional advisors with respect to such matters. Guggenheim Securities assumed that the mergers will qualify, for US federal income tax purposes, as a “reorganization” within the meaning of the Code, as amended. Guggenheim Securities did not express any view or render any opinion regarding the tax consequences of the mergers to RBA or IAA or their respective securityholders. |
• | Guggenheim Securities further assumed that: |
• | In all respects meaningful to its analyses, (i) the final executed form of the merger agreement amendment would not differ from the draft that Guggenheim Securities reviewed, (ii) RBA, IAA, Merger Sub 1, Merger Sub 2, and US Holdings, will comply with all terms and provisions of merger agreement and (iii) the representations and warranties of RBA, IAA, Merger Sub 1, Merger Sub 2, and US Holdings, contained in the merger agreement were true and correct and all conditions to the obligations of each party to the merger agreement to consummate the mergers would be satisfied without any waiver, amendment or modification thereof; and |
• | The mergers will be consummated in a timely manner in accordance with the terms of the merger agreement and in compliance with all applicable legal and other requirements, without any delays, |
• | based its financial analyses on various assumptions, including assumptions concerning general economic, business and capital markets conditions and industry-specific and company-specific factors, all of which are beyond the control of RBA, IAA, Merger Sub 1, Merger Sub 2, US Holdings, and Guggenheim Securities; |
• | did not form a view or opinion as to whether any individual analysis or factor, whether positive or negative, considered in isolation, supported or failed to support its opinion; |
• | considered the results of all of its financial analyses and did not attribute any particular weight to any one analysis or factor; and |
• | ultimately arrived at its opinion based on the results of all of its financial analyses assessed as a whole and believes that the totality of the factors considered and the various financial analyses performed by Guggenheim Securities in connection with its opinion operated collectively to support its determination as to the fairness, from a financial point of view and as of the date of such opinion, of the merger consideration pursuant to the mergers to the extent expressly specified in such opinion. |
• | such financial analyses, particularly those based on estimates and projections, are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than suggested by these analyses; |
• | none of the selected publicly traded companies used in the selected publicly traded companies analysis described below is identical or directly comparable to RBA or IAA, and none of the selected precedent merger and acquisition transactions used in the selected precedent merger and acquisition transactions analysis described below is identical or directly comparable to the mergers. However, such companies and transactions were selected by Guggenheim Securities, among other reasons, because they represented publicly traded companies or involved target companies which may be considered broadly similar, for purposes of Guggenheim Securities’ financial analyses, to RBA and IAA based on Guggenheim Securities’ familiarity with the industrials industry; |
• | in any event, selected publicly traded companies analysis and selected precedent merger and acquisition transactions analysis are not mathematical. Rather, such analyses involve complex considerations and |
• | such financial analyses do not purport to be appraisals or to reflect the prices at which any securities may trade at the present time or at any time in the future. |
• | Adjusted EBITA: means the relevant company's operating earnings (after deduction of stock-based compensation) before interest, taxes, amortization, and after giving effect to certain one-time adjustments as determined by the subject company. |
• | Adjusted EBITDA: means the relevant company's operating earnings (after deduction of stock-based compensation) before interest, taxes, depreciation amortization, and after giving effect to certain one-time adjustments as determined by the subject company. |
• | Adjusted EBITDA multiple: represents the relevant company's enterprise value divided by its historical or projected EBITDA. |
• | CapEx: means capital expenditures. |
• | DCF: means discounted cash flow. |
• | Enterprise value or EV: represents the relevant company’s net equity value (as defined below) plus (i) the par value of total debt plus (ii) the present value or book value of finance lease obligations plus (iii) the book value of any non-controlling/minority interests less (iv) cash and cash equivalents, excluding restricted cash and (v) book value of any non-consolidated investments. |
• | LTM: means latest twelve months. |
• | Net equity value: represents the relevant company’s (i) gross equity value as calculated (a) based on outstanding common shares held by third parties, restricted stock units and performance stock units (in each of the foregoing cases, as applicable) plus shares issuable upon the conversion or exercise of all in-the-money convertible securities, stock options and/or stock warrants times (b) the relevant company’s stock price less (ii) the cash proceeds from the assumed exercise of all in-the-money stock options and stock warrants. |
• | Unlevered free cash flows: means the relevant company’s after-tax unlevered operating cash flow minus CapEx and changes in working capital. |
• | VWAP: means volume-weighted average share price over the indicated period of time. |
Implied Merger Consideration per share of IAA Common Stock | | | | | $43.63 |
| | IAA Stock Price | | | Implied Premium / (Discount) | |
Acquisition Premium/(Discount) Relative to IAA’s: | | | | | ||
Closing Stock Price @ 1/20/23 | | | $40.65 | | | 7.3% |
10-Day VWAP (11/04/22) | | | 38.24 | | | 14.1 |
52-Week High (1/20/23) | | | 47.08 | | | (7.3) |
52-Week Low (1/20/23) | | | 31.81 | | | 37.2 |
5-Day VWAP (1/20/23) | | | 40.04 | | | 9.0 |
10-Day VWAP (1/20/23) | | | 39.59 | | | 10.2 |
30-Day VWAP (1/20/23) | | | 39.23 | | | 11.2 |
Merger Enterprise Value / EBITDA for IAA: | | | Multiple |
EV / IAA 2022E Adjusted EBITDA (Wall Street Consensus Estimates) | | | 13.2x |
EV / IAA 2023E Adjusted EBITDA (Wall Street Consensus Estimates) | | | 13.0x |
EV / IAA 2022E Adjusted EBITDA (Parent-Provided Financial Projections for IAA) | | | 12.9x |
EV / IAA 2023E Adjusted EBITDA (Parent-Provided Financial Projections for IAA) | | | 11.9x |
EV / IAA 2022E Adjusted EBITDA (Parent-Provided Financial Projections for IAA, including Synergies Estimates) | | | 10.9x |
EV / IAA 2023E Adjusted EBITDA (Parent-Provided Financial Projections for IAA, including Synergies Estimates) | | | 10.2x |
Merger Consideration per Share | | | | | $43.63 |
| | Reference Range | ||||
Financial Analyses | | | Low | | | High |
Discounted Cash Flow Analyses: | | | | | ||
IAA Stand-Alone DCF Valuation | | | $37 | | | $60 |
IAA Stand-Alone DCF Valuation Plus Synergies Estimates | | | $44 | | | $72 |
| | | | |||
Selected Publicly Traded Companies Analysis: | | | | | ||
IAA 2022E Adj. EBITDA | | | $40 | | | $66 |
IAA 2023E Adj. EBITDA | | | $42 | | | $65 |
IAA 2022E Adj. EBITA | | | $42 | | | $66 |
IAA 2023E Adj. EBITA | | | $44 | | | $66 |
| | | | |||
Selected Precedent M&A Transactions Analysis | | | $44 | | | $61 |
| | | | |||
For Informational Reference Purposes | | | | | ||
| | | | |||
Historical Public M&A Premia | | | $44 | | | $56 |
Analyst Price Targets | | | $40 | | | $60 |
IAA’s LTM Stock Price Range | | | $32 | | | $47 |
• | Guggenheim Securities utilized the parent-provided financial projections for IAA and the synergies estimates. |
• | Guggenheim Securities used a discount rate range of 8.25% – 9.75% based on its estimate of IAA’s weighted average cost of capital utilizing the capital asset pricing model and inputs based on Guggenheim Securities’ professional judgment and experience. |
• | In estimating IAA’s terminal/continuing value, Guggenheim Securities utilized a two-stage terminal/continuing value methodology. Specifically, after discussion with RBA senior management, Guggenheim Securities applied to IAA’s terminal year unlevered free cash flow (i) an interim unlevered free cash growth rate from declining from 7.5% in 2027 to 5.5% in 2031 and (ii) a range of perpetual growth rates of 3.00% – 4.00% thereafter. The terminal/continuing values implied by the foregoing two-stage terminal/continuing value methodology were cross-checked for reasonableness by reference to IAA’s implied terminal year EBITDA multiples. |
• | Guggenheim Securities subtracted the net debt of IAA as of October 2, 2022, as provided by and approved for Guggenheim Securities’ use by the management of RBA, from the range of illustrative total enterprise values it derived for IAA. |
| | EV / 2022E Adjusted EBITDA | | | EV / 2023E Adjusted EBITDA | | | EV / 2022E Adjusted EBITA | | | EV / 2023E Adjusted EBITA | |
Publicly Traded Companies | | | | | | | | | ||||
RBA | | | 16.7x | | | 16.1x | | | 18.9x | | | 18.8x |
IAA | | | 12.5x | | | 12.2x | | | 13.6x | | | 14.0x |
Copart, Inc. | | | 19.3x | | | 17.6x | | | 21.3x | | | 19.5x |
| | | | | | | | |||||
KAR Global | | | 10.9x | | | 9.4x | | | 12.5x | | | 10.5x |
CarMax, Inc. | | | 11.4x | | | 11.6x | | | 14.8x | | | 14.8x |
LKQ Corp. | | | 9.9x | | | 9.8x | | | 10.6x | | | 10.7x |
Statistical Summary | | | Average |
EV / 2022E Adjusted EBITDA | | | 12.9x |
EV / 2023E Adjusted EBITDA | | | 12.1x |
EV / 2022E Adjusted EBITA | | | 14.8x |
EV / 2023E Adjusted EBITA | | | 13.9x |
Date Announced | | | Acquiror | | | Target Company | | | EV (mm) | | | EV / EBITDA |
03/22 | | | One Equity Partners LLC | | | PGW Auto Glass (LKQ Corp.) | | | $362 | | | ~9.1x |
02/22 | | | Carvana | | | ADESA (KAR Global) | | | $2,200 | | | 19.5x |
10/21 | | | IAA | | | SYNETIQ Ltd | | | £225 | | | 13.2x |
08/21 | | | RBA | | | Euro Auctions (Terminated) | | | £775 | | | 18.8x |
06/19 | | | TDR Capital | | | BCA Marketplace plc | | | £2,146 | | | 12.5x |
08/16 | | | RBA | | | IronPlanet | | | $659 | | | 21.5x |
07/16 | | | BCA Marketplace plc | | | Paragon Automotive | | | £103 | | | ~9.3x |
02/16 | | | KAR Global | | | Brasher’s Auto Auctions | | | $283 | | | 8.3x |
08/11 | | | KAR Global | | | OPENLANE | | | $210 | | | 16.2x |
12/09 | | | Clayton, Dubilier & Rice | | | BCA Limited | | | £400 | | | ~8.9x |
12/06 | | | Kelso & Company, GS Capital | | | ADESA | | | $2,684 | | | 9.3x |
| | Partners, Value Act Capital and | | | | | | | ||||
| | Parthenon Capital | | | | | | | ||||
02/05 | | | Kelso & Company | | | IAA | | | $395 | | | 13.8x |
Statistical Summary | | | | |||
25th Percentile: | | | | | 9.3x | |
Mean: | | | | | 13.4x | |
Median: | | | | | 13.0x | |
75th Percentile: | | | | | 15.7x | |
Merger | | | 6,900x | | | 12.9x |
Closing Price of RBA Common Shares on Jan. 20, 2023 | | | $60.17 | | |
| | Reference Range | ||||
Financial Analyses | | | Low | | | High |
Discounted Cash Flow Analyses: | | | | | ||
RBA Stand-Alone DCF Valuation | | | $57 | | | $89 |
For Informational Reference Purposes | | | | | ||
Analyst Price Targets | | | $62 | | | $70 |
RBA LTM Stock Price Range | | | $50 | | | $73 |
• | Guggenheim Securities utilized the parent-provided financial projections. |
• | Guggenheim Securities used a discount rate range of 7.75% – 9.00% based on its estimate of RBA’s weighted average cost of capital utilizing the capital asset pricing model and inputs based on Guggenheim Securities’ professional judgment and experience. |
• | In estimating RBA terminal/continuing value, Guggenheim Securities utilized a two-stage terminal/continuing value methodology. Specifically, after discussion with RBA’s senior management, Guggenheim Securities applied to RBA’s terminal year unlevered free cash flow (i) an interim unlevered free cash growth rate from declining from 10.5% in 2027 to 5.5% in 2031 and (ii) a range of perpetual growth rates of 3.00% – 4.00% thereafter. The terminal/continuing values implied by the foregoing two-stage terminal/continuing value methodology were cross-checked for reasonableness by reference to RBA’s implied terminal year EBITDA multiples. |
• | Guggenheim Securities subtracted the net debt of RBA as of September 30, 2022, as provided by and approved for Guggenheim Securities’ use by the management of RBA, from the range of illustrative total enterprise values it derived for RBA. |
• | Guggenheim Securities utilized the parent-provided financial projections for each of IAA and RBA and the synergies estimates. |
• | Guggenheim Securities used a discount rate range of 8.05% – 9.30% based on its estimate of the combined company’s weighted average cost of capital utilizing the capital asset pricing model and inputs based on Guggenheim Securities’ professional judgment and experience. |
• | In estimating RBA terminal/continuing value, Guggenheim Securities utilized a two-stage terminal/continuing value methodology. Specifically, after discussion with RBA’s senior management, Guggenheim Securities applied to the combined company’s terminal year unlevered free cash flow (i) an interim unlevered free cash growth rate declining from 8.9% in 2027 to 5.5% in 2031, which rates were approximately equal to the weighted average interim unlevered free cash flow growth rates of each of IAA and RBA and (ii) a range of perpetual growth rates of 3.00% – 4.00% thereafter. The terminal/continuing values implied by the foregoing two-stage terminal/continuing value methodology were cross-checked for reasonableness by reference to the implied terminal year EBITDA multiple for the combined company. |
• | Guggenheim Securities subtracted the pro forma net debt as of September 30, 2022 for RBA and as of October 2, 2022 for IAA, as provided by and approved for Guggenheim Securities’ use by the management of RBA, from the range of illustrative pro forma total enterprise values it derived. |
• | reviewed the original merger agreement and the merger agreement amendment; |
• | reviewed certain publicly available business and financial information concerning IAA and RBA and the industries in which they operate; |
• | compared the proposed financial terms of the mergers with the publicly available financial terms of certain transactions involving companies J.P. Morgan deemed relevant and the consideration paid for such companies; |
• | compared the financial and operating performance of IAA and RBA with publicly available information concerning certain other companies J.P. Morgan deemed relevant and reviewed the current and historical market prices of IAA common stock and RBA common shares and certain publicly traded securities of such other companies; |
• | reviewed certain internal financial analyses and forecasts prepared by or at the direction of the management of IAA relating to the respective businesses of IAA and RBA, as well as the estimated amount and timing of the cost savings and related expenses and synergies expected to result from the mergers; and |
• | performed such other financial studies and analyses and considered such other information as J.P. Morgan deemed appropriate for the purposes of its opinion. |
• | Copart, Inc. (“Copart”) |
• | RBA |
• | KAR |
• | IAA |
| | 2022E FV/ Adj. EBITDA | | | 2023E FV/ Adj. EBITDA | |
Copart | | | 18.9x | | | 17.7x |
RBA | | | 17.4x | | | 16.3x |
KAR | | | 12.0x | | | 9.9x |
IAA | | | 12.2x | | | 11.4x |
| | Implied Equity Value Per Share of IAA Common Stock | ||||
| | Low | | | High | |
FV/2022E Adj. EBITDA | | | $38.00 | | | $64.00 |
FV/2023E Adj. EBITDA | | | $37.50 | | | $63.25 |
Target | | | Acquiror | | | Month/Year Announced | | | FV / LTM EBITDA |
BCA Marketplace plc(1) | | | Haversham Holdings plc | | | March 2015 | | | 15.4x |
BCA Marketplace plc | | | TDR Capital LLP | | | June 2019 | | | 12.5x |
Euro Auctions UK Ltd(2)(3) | | | RBA | | | August 2021 | | | 18.8x |
SYNETIQ Ltd. | | | IAA | | | October 2021 | | | 13.2x |
| | | | | | ||||
For reference only | | | | | | | |||
Iron Planet, Inc.(4) | | | RBA | | | August 2016 | | | 22.6x |
ADESA, Inc.(5) | | | Carvana Co. | | | February 2022 | | | 19.5x |
(1) | Based on 2014E adj. EBITDA at the time of the transaction. |
(2) | Based on 2021E adj. EBITDA, excludes $13 million of annual cost synergies. |
(3) | Termination announced in April 2022 and termination completed in June 2022. |
(4) | Exclusive of $100 million NPV of tax synergies and $20 million in run-rate cost synergies. |
(5) | 2021 EBITDA of $113 million based on Carvana’s April 2022 ADESA U.S. investor presentation. |
• | Copart |
• | IAA |
• | KAR |
• | RBA |
| | 2022E FV/ Adj. EBITDA | | | 2023E FV/ Adj. EBITDA | |
Copart | | | 18.9x | | | 17.7x |
RBA | | | 17.4x | | | 16.3x |
KAR | | | 12.0x | | | 9.9x |
IAA | | | 12.2x | | | 11.4x |
| | Implied Equity Value Per RBA Common Share | ||||
| | Low | | | High | |
FV/2022E Adj. EBITDA | | | $42.75 | | | $66.25 |
FV/2023E Adj. EBITDA | | | $37.75 | | | $65.00 |
Target | | | Acquiror | | | Month/Year Announced | | | FV / LTM EBITDA |
BCA Marketplace plc(1) | | | Haversham Holdings plc | | | March 2015 | | | 15.4x |
BCA Marketplace plc | | | TDR Capital LLP | | | June 2019 | | | 12.5x |
Euro Auctions UK Ltd(2)(3) | | | RBA | | | August 2021 | | | 18.8x |
SYNETIQ Ltd. | | | IAA | | | October 2021 | | | 13.2x |
Iron Planet, Inc.(4) | | | RBA | | | August 2016 | | | 22.6x |
| | | | | | ||||
For reference only | | | | | | | |||
ADESA, Inc.(5) | | | Carvana Co. | | | February 2022 | | | 19.5x |
(1) | Based on 2014E adj. EBITDA at the time of the transaction. |
(2) | Based on 2021E adj. EBITDA, excludes $13 million of annual cost synergies. |
(3) | Termination announced in April 2022 and termination completed in June 2022. |
(4) | Exclusive of $100 million NPV of tax synergies and $20 million in run-rate cost synergies. |
(5) | 2021 EBITDA of $113 million based on Carvana’s April 2022 ADESA U.S. investor presentation. |
| | DCF Analysis | ||||
| | Low | | | High | |
Implied Value of Projected Net Synergies (in millions) | | | $946 | | | $1,242 |
| | 2022E | | | 2023E | | | 2024E | | | 2025E | | | 2026E | |
Revenue | | | $1,682 | | | $1,722 | | | $1,840 | | | $1,987 | | | $2,157 |
Net Income | | | $318 | | | $219 | | | $249 | | | $283 | | | $333 |
Add: Depreciation and Amortization | | | 99 | | | 104 | | | 109 | | | 112 | | | 111 |
Add: Interest Expense | | | 58 | | | 37 | | | 31 | | | 30 | | | 30 |
Less: Interest Income | | | (4) | | | (4) | | | (2) | | | (2) | | | (2) |
Add: Income Tax Expense | | | 89 | | | 84 | | | 96 | | | 109 | | | 128 |
EBITDA(1) | | | $559 | | | $440 | | | $484 | | | $532 | | | $601 |
Adjusted EBITDA(2)(3) | | | $415 | | | $443 | | | $484 | | | $532 | | | $601 |
(1) | EBITDA is a non-GAAP financial measure defined as earnings before interest, taxes, depreciation and amortization. |
(2) | Adjusted EBITDA is a non-GAAP financial measure defined as earnings before interest, taxes, depreciation and amortization adjusted for non-recurring items. This calculation differs from RBA’s reported Adjusted EBITDA as it does not include an adjustment for share-based payments expense. |
(3) | For fiscal year 2022, reflects the addition of approximately $17 million of estimated acquisition-related costs and approximately $10 million of other non-recurring costs to, and the deduction of approximately $171 million of gain on disposition of property, plant and equipment from, estimated EBITDA. For fiscal year 2023, reflects the addition of estimated acquisition-related costs to estimated EBITDA. |
| | 2022E | | | 2023E | | | 2024E | | | 2025E | | | 2026E | |
Adjusted EBITDA(1) | | | $415 | | | $443 | | | $484 | | | $532 | | | $601 |
Less: Taxes | | | (81) | | | (94) | | | (104) | | | (117) | | | (136) |
Less: Capital Expenditures(2) | | | (103) | | | (166) | | | (76) | | | (58) | | | (67) |
Less: Change in Working Capital | | | (24) | | | (45) | | | (30) | | | (29) | | | (27) |
Unlevered FCF(3) | | | $207 | | | $137 | | | $274 | | | $328 | | | $371 |
(1) | Adjusted EBITDA is a non-GAAP financial measure defined as earnings before interest, taxes, depreciation and amortization adjusted for non-recurring items. This calculation differs from RBA’s reported Adjusted EBITDA as it does not include an adjustment for share-based payments expense. |
(2) | Capital expenditures for fiscal year 2023 reflect accelerated spend to support IT infrastructure and facilities management. |
(3) | Unlevered FCF is a non-GAAP financial measure calculated as Adjusted EBITDA less cash taxes, less capital expenditures and less changes in net working capital. |
| | 2022E | | | 2023E | | | 2024E | | | 2025E | | | 2026E | |
Revenue | | | $1,682 | | | $1,773 | | | $1,952 | | | $2,164 | | | $2,414 |
Net Income | | | $318 | | | $227 | | | $275 | | | $332 | | | $413 |
Add: Depreciation and Amortization | | | 99 | | | 104 | | | 109 | | | 112 | | | 111 |
Add: Interest Expense | | | 58 | | | 37 | | | 31 | | | 30 | | | 30 |
Less: Interest Income | | | (4) | | | (4) | | | (2) | | | (2) | | | (2) |
Add: Income Tax Expense | | | 89 | | | 88 | | | 106 | | | 128 | | | 159 |
EBITDA(2) | | | $559 | | | $452 | | | $519 | | | $601 | | | $711 |
Adjusted EBITDA(3)(4) | | | $415 | | | $454 | | | $519 | | | $601 | | | $711 |
(1) | The forecasts made available to IAA in August 2022 provided for estimated Revenue, Net Income, EBITDA and Adjusted EBITDA for fiscal year 2022 of $1,633 million, $323 million, $571 million and $415 million, respectively. The table above includes RBA’s forecast for fiscal year 2022 as updated in October 2022. |
(2) | EBITDA is a non-GAAP financial measure defined as earnings before interest, taxes, depreciation and amortization. |
(3) | Adjusted EBITDA is a non-GAAP financial measure defined as earnings before interest, taxes, depreciation and amortization adjusted for non-recurring items. This calculation differs from RBA’s reported Adjusted EBITDA as it does not include an adjustment for share-based payments expense. |
(4) | For fiscal year 2022, reflects the addition of approximately $17 million of estimated acquisition-related costs and approximately $10 million of other non-recurring costs to, and the deduction of approximately $171 million of gain on disposition of property, plant and equipment from, estimated EBITDA. For fiscal year 2023, reflects the addition of estimated acquisition-related costs to estimated EBITDA. |
| | 2022E | | | 2023E | | | 2024E | | | 2025E | | | 2026E | |
Revenue | | | $2,098 | | | $2,279 | | | $2,510 | | | $2,731 | | | $2,959 |
Gross Profit | | | $727 | | | $802 | | | $889 | | | $983 | | | $1,078 |
Adjusted EBITDA(1) | | | $535 | | | $578 | | | $652 | | | $727 | | | $804 |
(1) | Adjusted EBITDA is a non-GAAP financial measure defined as earnings before interest, taxes, depreciation and amortization adjusted for non-recurring items. This calculation differs from RBA’s reported Adjusted EBITDA as it does not include an adjustment for share-based payments expense. |
| | 2022E | | | 2023E | | | 2024E | | | 2025E | | | 2026E | |
Adjusted EBITDA(1) | | | $535 | | | $578 | | | $652 | | | $727 | | | $804 |
Less: Taxes | | | (91) | | | (113) | | | (127) | | | (143) | | | (158) |
Less: Capital Expenditures | | | (119) | | | (155) | | | (165) | | | (176) | | | (187) |
Less: Change in Working Capital | | | (72) | | | (44) | | | (52) | | | (46) | | | (67) |
Unlevered FCF(2) | | | $252 | | | $266 | | | $308 | | | $363 | | | $392 |
(1) | Adjusted EBITDA is a non-GAAP financial measure defined as earnings before interest, taxes, depreciation and amortization adjusted for non-recurring items. This calculation differs from RBA’s reported adjusted EBITDA as it does not include an adjustment for share-based payments expense. |
(2) | Unlevered FCF is a non-GAAP financial measure calculated as Adjusted EBITDA less cash taxes, less capital expenditures and less changes in net working capital. |
| | Year 1 (2023E) | | | Year 2 (2024E) | | | Year 3 (2025E) | | | Year 4 (2026E) | |
Net Realizable Cost Synergies | | | $(28) | | | $13 | | | $68 | | | $100 |
| | 2022E | | | 2023E | | | 2024E | | | 2025E | | | 2026E | |
Revenue | | | $3,780 | | | $4,001 | | | $4,350 | | | $4,718 | | | $5,116 |
Adjusted EBITDA(1) | | | $950 | | | $1,021 | | | $1,136 | | | $1,260 | | | $1,404 |
Adjusted EBITDA including Net Realizable Cost Synergies(1) | | | $950 | | | $993 | | | $1,149 | | | $1,328 | | | $1,504 |
(1) | Adjusted EBITDA is a non-GAAP financial measure defined as earnings before interest, taxes, depreciation and amortization adjusted for non-recurring items. This calculation differs from RBA’s reported Adjusted EBITDA as it does not include an adjustment for share-based payments expense. |
| | 2022E | | | 2023E | | | 2024E | | | 2025E | | | 2026E | |
Adjusted EBITDA including Net Realizable Cost Synergies(1) | | | $950 | | | $993 | | | $1,149 | | | $1,328 | | | $1,504 |
Less: Integration Costs | | | — | | | (10) | | | (10) | | | — | | | — |
Less: Taxes | | | (190) | | | (198) | | | (234) | | | (279) | | | (323) |
Less: Capital Expenditures | | | (222) | | | (322) | | | (241) | | | (234) | | | (254) |
Less: Change in Working Capital | | | (97) | | | (89) | | | (81) | | | (75) | | | (93) |
Unlevered FCF(2) | | | $440 | | | $375 | | | $583 | | | $740 | | | $835 |
(1) | Adjusted EBITDA is a non-GAAP financial measure defined as earnings before interest, taxes, depreciation and amortization adjusted for non-recurring items. Also includes estimated net realizable cost synergies from the mergers (see the section entitled “—Summary of RBA Cost Synergy Forecasts” above). This calculation differs from RBA’s reported Adjusted EBITDA as it does not include an adjustment for share-based payments expense. |
(2) | Unlevered FCF is a non-GAAP financial measure calculated as Adjusted EBITDA including Net Realizable Cost Synergies less cash taxes, less capital expenditures and less changes in net working capital. Also excludes estimated integration costs. |
| | 2022E | | | 2023E | | | 2024E | | | 2025E | | | 2026E | | | 2027E | | | 2028E | | | 2029E | | | 2030E | | | 2031E | |
Revenue | | | $2,129 | | | $2,347 | | | $2,541 | | | $2,780 | | | $3,010 | | | $3,224 | | | $3,416 | | | $3,580 | | | $3,711 | | | $3,804 |
Gross Profit | | | $801 | | | $884 | | | $940 | | | $1,041 | | | — | | | — | | | — | | | — | | | — | | | — |
Adjusted EBITDA(2) | | | $583 | | | $654 | | | $698 | | | $787 | | | $852 | | | $912 | | | $966 | | | $1,013 | | | $1,050 | | | $1,076 |
(1) | Fiscal years 2022-2025 reflect IAA management forecasts and fiscal years 2026-2031 reflect extrapolations thereof prepared by IAA management and approved by IAA management for use by J.P. Morgan in its preliminary financial analyses. |
(2) | Adjusted EBITDA is a non-GAAP financial measure defined as earnings before interest, taxes, depreciation and amortization adjusted for non-recurring items and burdened by stock-based compensation. |
| | 2022E | | | 2023E | | | 2024E | | | 2025E | | | 2026E | | | 2027E | | | 2028E | | | 2029E | | | 2030E | | | 2031E | |
Revenue | | | $2,098 | | | $2,279 | | | $2,510 | | | $2,731 | | | $2,959 | | | $3,172 | | | $3,363 | | | $3,526 | | | $3,655 | | | $3,747 |
Gross Profit | | | $727 | | | $802 | | | $889 | | | $983 | | | $1,078 | | | — | | | — | | | — | | | — | | | — |
Adjusted EBITDA(3) | | | $535 | | | $578 | | | $652 | | | $727 | | | $804 | | | $861 | | | $913 | | | $958 | | | $993 | | | $1,018 |
(1) | Fiscal years 2022-2026 reflect IAA management forecasts and fiscal years 2027-2031 reflect extrapolations thereof prepared by IAA management and approved by IAA management for use by J.P. Morgan in its financial analyses. |
(2) | The IAA forecasts presented to the IAA board in July 2022 provided for estimated fiscal year 2022 revenue, gross profit and adjusted EBITDA of $2,136 million, $780 million, and $565 million, respectively, and estimated fiscal year 2023 revenue, gross profit and adjusted EBITDA of $2,331 million, $833 million, and $598 million, respectively. IAA updated its forecasts for its 2022 and 2023 fiscal years through October 2022 as further described in section entitled “—Background of the Mergers.” |
(3) | Adjusted EBITDA is a non-GAAP financial measure defined as earnings before interest, taxes, depreciation and amortization adjusted for non-recurring items and burdened by stock-based compensation. |
| | 2022E | | | 2023E | | | 2024E | | | 2025E | | | 2026E | | | 2027E | | | 2028E | | | 2029E | | | 2030E | | | 2031E | |
NOPAT(1) | | | $339 | | | $353 | | | $401 | | | $452 | | | $502 | | | $547 | | | $591 | | | $630 | | | $664 | | | $695 |
Plus: depreciation and amortization | | | 104 | | | 112 | | | 123 | | | 132 | | | 141 | | | 139 | | | 134 | | | 126 | | | 116 | | | 101 |
Less: Capital Expenditures | | | (119) | | | (155) | | | (165) | | | (176) | | | (187) | | | (175) | | | (161) | | | (145) | | | (127) | | | (106) |
Less: Change in Net Working Capital | | | (72) | | | (44) | | | (52) | | | (46) | | | (67) | | | (62) | | | (56) | | | (48) | | | (38) | | | (27) |
Unlevered FCF(2) | | | $252 | | | $266 | | | $307 | | | $362 | | | $390 | | | $449 | | | $508 | | | $564 | | | $615 | | | $663 |
(1) | NOPAT is a non-GAAP financial measure defined as net operating profit after taxes. |
(2) | Unlevered FCF is a non-GAAP financial measure defined as cash flow before accounting for interest; calculated as NOPAT, plus depreciation and amortization, minus capital expenditures, minus change in net working capital. |
| | 2022E | | | 2023E | | | 2024E | | | 2025E | | | 2026E | | | 2027E | | | 2028E | | | 2029E | | | 2030E | | | 2031E | |
Revenue | | | $1,644 | | | $1,728 | | | $1,852 | | | $2,025 | | | $2,216 | | | $2,399 | | | $2,568 | | | $2,719 | | | $2,846 | | | $2,946 |
Gross Profit | | | $949 | | | $1,001 | | | $1,085 | | | $1,192 | | | $1,320 | | | — | | | — | | | — | | | — | | | — |
Adjusted EBITDA(2) | | | $415 | | | $442 | | | $492 | | | $549 | | | $624 | | | $675 | | | $723 | | | $765 | | | $801 | | | $829 |
(1) | Fiscal years 2022-2026 reflect IAA management adjustments to the RBA forecasts and fiscal years 2027-2031 reflect extrapolations thereof prepared by IAA management and approved by IAA management for use by J.P. Morgan in its financial analyses. |
(2) | Adjusted EBITDA is a non-GAAP financial measure defined as earnings before interest, taxes, depreciation and amortization adjusted for non-recurring items and burdened by stock-based compensation. |
| | 2022E | | | 2023E | | | 2024E | | | 2025E | | | 2026E | | | 2027E | | | 2028E | | | 2029E | | | 2030E | | | 2031E | |
NOPAT(1) | | | $246 | | | $171 | | | $291 | | | $335 | | | $377 | | | $415 | | | $451 | | | $485 | | | $516 | | | $543 |
Plus: depreciation and amortization | | | 101 | | | 205 | | | 89 | | | 86 | | | 102 | | | 101 | | | 98 | | | 93 | | | 86 | | | 77 |
Less: Capital Expenditures(2) | | | 69 | | | (167) | | | (62) | | | (44) | | | (61) | | | (66) | | | (71) | | | (75) | | | (79) | | | (81) |
Less: Change in Net Working Capital | | | (43) | | | (43) | | | (26) | | | (23) | | | (18) | | | (17) | | | (16) | | | (14) | | | (12) | | | (9) |
Unlevered FCF(3) | | | $372 | | | $166 | | | $291 | | | $353 | | | $399 | | | $432 | | | $462 | | | $489 | | | $512 | | | $529 |
(1) | NOPAT is a non-GAAP financial measure defined as net operating profit after taxes. |
(2) | 2022E Capital Expenditures includes proceeds from capital divestiture. |
(3) | Unlevered FCF is a non-GAAP financial measure defined as cash flow before accounting for interest; calculated as NOPAT, plus depreciation and amortization, minus capital expenditures, minus change in net working capital. |
| | Year 1 | | | Year 2 | | | Year 3 | | | Year 4 | | | Year 5 | | | Year 6 | | | Year 7 | | | Year 8 | | | Year 9 | | | Year 10 | |
EBITDA(1) | | | ($26) | | | $25 | | | $71 | | | $100 | | | $100 | | | $103 | | | $105 | | | $108 | | | $110 | | | $113 |
Unlevered FCF(2) | | | ($14) | | | $32 | | | $73 | | | $96 | | | $97 | | | $91 | | | $86 | | | $88 | | | $84 | | | $86 |
(1) | Net of projected costs to achieve such EBITDA. EBITDA is a non-GAAP financial measure defined as earnings before interest, taxes, depreciation and amortization. |
(2) | Unlevered FCF is a non-GAAP financial measure defined as cash flow before accounting for interest; calculated as NOPAT, plus depreciation and amortization, minus any capital expenditures, minus any change in net working capital. |
• | organization no violations; consents and approvals; |
• | capital structure; |
• | authority; no violations; consents and approvals; |
• | consents; |
• | SEC documents and financial statements; |
• | absence of certain changes or events; |
• | no undisclosed material liabilities; |
• | information supplied by IAA in this joint proxy statement/prospectus; |
• | permits and compliance with applicable law; |
• | compensation and benefits matters; |
• | labor matters; |
• | taxes; |
• | litigation and judgments; |
• | intellectual property; data privacy and cyber security; |
• | real property; |
• | environmental matters; |
• | certain business practices and international trade laws; |
• | CFIUS; |
• | material contracts; |
• | insurance; |
• | opinion of IAA’s financial advisor; |
• | brokers; |
• | related party transactions; |
• | applicability of takeover laws; |
• | tax treatment; |
• | the Investment Canada Act; |
• | top customers; and |
• | investment company status. |
• | organization, standing and power; |
• | capital structure; |
• | authority; no violations; consents and approvals; |
• | consents; |
• | SEC documents; financial statements and Canadian securities law matters; |
• | absence of certain changes or events; |
• | no undisclosed material liabilities; |
• | information supplied by RBA in this joint proxy statement/prospectus; |
• | permits and compliance with applicable law; |
• | compensation and benefits matters; |
• | labor matters; |
• | taxes; |
• | litigation and judgments; |
• | intellectual property; data privacy and cyber security; |
• | real property; |
• | environmental matters; |
• | certain business practices and international trade laws; |
• | material contracts; |
• | opinions of RBA’s financial advisors; |
• | brokers; |
• | related party transactions; |
• | business conduct; |
• | tax treatment; |
• | top customers; |
• | financing matters; |
• | investment company status; |
• | solvency; |
• | RBA’s shareholder rights plan; and |
• | the Investment Canada Act. |
• | general economic conditions (or changes in such conditions) or conditions in the U.S., Canada or any other country or region in the world or global economies generally or conditions (or changes in such conditions) generally affecting the industry in which such party and its subsidiaries operate; |
• | conditions (or changes in such conditions) in the securities markets, credit markets, currency markets or other financial markets, including (a) changes in interest rates, changes in inflation rates and changes in exchange rates for the currencies of any countries and (b) any suspension of trading in securities generally on any securities exchange or over-the-counter market; |
• | political conditions (or changes in such conditions), the outbreak of a pandemic, epidemic, endemic or other widespread health crisis (including COVID-19), or acts of war, hostilities, civil or political unrest, sabotage, cyber-intrusion or terrorism (including any escalation or general worsening of any such acts of war, sabotage, cyber-intrusion or terrorism); |
• | earthquakes, hurricanes, tsunamis, tornadoes, floods, mudslides, wildfires or other natural disasters or weather conditions (including any general worsening of any of the foregoing); |
• | changes (or proposed changes) in law or other legal or regulatory conditions, or the interpretation thereof, or changes in GAAP or other accounting standards (or the interpretation thereof), or that result from any action taken for the purpose of complying with any of the foregoing; |
• | the announcement of the merger agreement (whether or not authorized by the parties, including any pre-signing reports relating to the mergers) or the pendency or consummation of the mergers or the identity of, or any facts or circumstances relating to, the other party or any of its subsidiaries, including the impact of any of the foregoing on the relationships, contractual or otherwise, of such party or any of its subsidiaries with governmental entities, customers, suppliers, vendors, partners, officers, employees or other material business relations (other than with respect to any representation or warranty that is intended to address the consequences of the execution or delivery of the merger agreement or the announcement or consummation of the mergers); |
• | the execution and delivery of or compliance with the terms of, or the taking of any action or failure to take any action for which action or failure to act is requested in writing by the other party or expressly required by the merger agreement (except that this clause will not apply to any representation or warranty to the extent the purpose of such representation or warranty is to address the consequences resulting from the execution and delivery or compliance with the terms of the merger agreement); |
• | any changes in such party’s stock price or the trading volume of such party’s stock (or any other securities of such party), or any failure by such party to meet any analysts’ estimates or expectations of such party’s revenue, earnings or other financial performance or results of operations for any period, or any failure by such party or any of its subsidiaries to meet any internal or published budgets, plans or forecasts of its revenues, earnings or other financial performance or results of operations (it being understood that the facts or occurrences giving rise to or contributing to such changes or failures may constitute, or be taken into account in determining whether there has been or will be, a material adverse effect); or |
• | any litigation relating to the transactions, |
• | declare, set aside or pay any dividends, (whether in cash, stock or property or any combination thereof) on, or make any other distribution in respect of any outstanding capital stock of, or other equity interests in, IAA or its subsidiaries except for dividends and distributions by a wholly owned subsidiary of IAA to IAA or another subsidiary of IAA; |
• | offer, issue, deliver, grant, sell or purchase, or authorize or propose to offer, issue, deliver, grant, sell or purchase, any capital stock of, or other equity interests in, IAA or any of its subsidiaries or any securities convertible into, or any rights, warrants or options to acquire, any such capital stock or equity interests, other than (a) the grant of IAA RSU awards under the IAA equity plan in the ordinary course of business consistent with past practice (i) to employees hired after the date of the original merger agreement and (ii) in connection with promotions, (b) the issuance of IAA common stock issuable pursuant to the vesting, exercise or settlement, as applicable, of IAA options or IAA RSU awards or IAA PRSU awards that are outstanding on the date of the original merger agreement or that are granted after the date of the original merger agreement, in each case pursuant to their terms, (c) pursuant to the IAA ESPP, (d) sales of shares to satisfy tax withholding obligations related to the exercise of IAA options or the settlement of IAA RSU awards or IAA PRSU awards and (e) issuances by a wholly owned subsidiary of IAA of such subsidiary’s capital stock or other equity interests to IAA or any other wholly owned subsidiary of IAA; |
• | amend or propose to amend (a) IAA’s organizational documents or (b) the organizational documents of any of IAA’s subsidiaries (other than ministerial changes); |
• | (a) merge, consolidate, combine or amalgamate with any person (other than transactions between IAA and its wholly owned subsidiaries or between IAA’s wholly owned subsidiaries), (b) acquire or agree to acquire (including by merging or consolidating with, purchasing any controlling equity interest in or a majority of the assets of, or acquiring an exclusive license to, in each case, as applicable) any business or division of another person or assets comprising a business or division or (c) acquire or agree to acquire (including by acquiring an exclusive license to, but excluding non-exclusive licenses of commercial software in the ordinary course of business) any assets of another person not described in (b) other than in the case of (b) and (c), acquisitions for which the consideration is less than $25,000,000 in the aggregate or the acquisition of inventory, equipment, consigned goods (including related prepaid charges), materials, consumables and similar assets in the ordinary course of business; |
• | sell, lease, swap, exchange, transfer, license, encumber (other than permitted encumbrances) or otherwise dispose of, or agree to sell, lease, swap, exchange, transfer, license, encumber (other than permitted encumbrances) or otherwise dispose of, any material portion of its assets or properties, other than (a) sales or dispositions of inventory in the ordinary course of business, (b) non-exclusive licenses in the ordinary course of business, (c) dispositions of obsolete or worthless equipment or other assets in the ordinary course of business, (d) dispositions, leases, swaps and exchanges of IAA’s leased real property in the ordinary course of business and (e) other sales or dispositions of assets for which the consideration is less than $20,000,000 in the aggregate; except that, in the case of (d), certain specified leased real property of IAA will not be disposed of, leased, swapped or exchanged; |
• | authorize, recommend, propose, enter into, adopt a plan or announce an intention to adopt a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization of IAA or any of its subsidiaries, other than such transactions among wholly owned subsidiaries of IAA; |
• | change in any material respect its financial accounting principles, practices or methods that would materially affect the consolidated assets, liabilities or results of operations of IAA and its subsidiaries, except as required by applicable law, GAAP or stock exchange requirements; |
• | make, change or revoke any material tax election (but excluding any election that must be made periodically and is made consistent with past practice), change an annual tax accounting period, change any material tax accounting method, file any material amended tax return, enter into any material closing agreement with respect to taxes, settle or compromise any material proceeding regarding any taxes, surrender any right to claim a material tax refund or agree to an extension or waiver of the statute of limitations with respect to the assessment or determination of any material taxes (other than extensions of time to file tax returns); |
• | take any action (other than any action required or expressly contemplated by the merger agreement) or fail to take any action (other than any action prohibited by the merger agreement), but, for the avoidance of doubt, without taking into account fluctuations in the fair market value of the RBA capital shares and/or the IAA capital stock after the date of the original merger agreement, where such action or failure to act would reasonably be expected to (a) prevent or impede the mergers from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code, (b) cause the IAA stockholders (other than any excepted shareholder) to recognize gain pursuant to Section 367(a)(1) of the Code, (c) cause RBA to be treated as a “domestic corporation” pursuant to Section 7874(b) of the Code as a result of the mergers, (d) prevent or impede IAA or RBA from delivering the executed tax certificates in connection with this joint proxy statement/prospectus and at closing or (e) without regard to whether the mergers will cause (1) the spin to fail to qualify for tax-free treatment under Section 355 of the Code or (2) the IAA shares distributed in the spin to not be treated as “qualified property” (for purposes of section 355(c)(2) or Section 361(c)(2) of the Code) by reason of the application of Section 355(d) or Section 355(e) of the Code, cause IAA to be in material violation of any of its representations, warranties, and covenants in the tax matters agreement with KAR; |
• | except as required pursuant to an existing IAA benefit plan as in effect on the date of the original merger agreement or established after the date of the original merger agreement, (a) grant or commit to grant any increases in the compensation, bonus, severance, termination pay or other benefits payable or that may become payable to any current or former directors, officers, or employees of IAA or any subsidiary other than increases in the base salary or wages or cash incentive compensation of employees in the ordinary course of business, (b) take any action to accelerate the vesting or lapsing of restrictions or payment, or fund or in any other way secure the payment, of compensation or benefits under any IAA benefit plan, (c) grant or commit to grant any equity based awards or accelerate the vesting of any IAA RSU awards, IAA PRSU awards or IAA options, (d) enter into any new, or amend any existing, employment, severance, termination change-in-control or similar agreement with any director, officer or employee, (e) pay or commit to pay any bonuses, other than payment of annual or other short-term cash bonuses for completed performance periods in accordance with IAA benefits plans existing as of the date of the original merger agreement, (f) establish, enter into or adopt any IAA benefit plan which was not in existence as of the date of the original merger agreement (or any arrangement that would be an IAA benefit plan if it had been in existence as of the date of the original merger agreement), or amend or terminate any IAA benefit plan, in each case, except for changes to the contractual terms of health and welfare plans made in the ordinary course of business, (g) hire, engage, terminate (other than for cause), furlough, or temporarily lay off any employee or independent contractor with an annualized base salary in excess of $250,000 or with a title of director or above or (h) waive or release any non-competition, non-solicitation, non-disclosure, non-interference, non-disparagement, or other restrictive covenant obligation of any current or former director, officer, employee or independent contractor (see the section entitled “Interests of IAA Directors and Executive Officers in the Mergers” for a description of certain agreed exceptions to these restrictions, including exceptions permitting IAA to establish a transaction bonus program and a retention bonus program); |
• | voluntarily recognize any labor union, works council, or other labor organization as the bargaining representative of any employees; |
• | (a) incur, create, assume, waive or release any indebtedness for borrowed money (including any bonds, notes or debentures) or guarantee any such indebtedness of another person or (b) incur, create or assume any encumbrances on any property or assets of IAA or any of its subsidiaries in connection with any indebtedness thereof, other than permitted encumbrances; except, that the foregoing will not restrict the incurrence of revolving indebtedness in the ordinary course of business (i) under the IAA credit facility, as in effect on the date of the original merger agreement or (ii) the creation of any encumbrances securing as of the date hereof any indebtedness permitted by (i), so long as borrowings under the IAA credit facility do not exceed at any one time outstanding a specified amount; |
• | make any loans, advances or capital contributions to, or non-controlling investments in, any other person in excess of $10,000,000 in the aggregate, except for (a) extensions of credit or incentive payments to customers in the ordinary course of business, (b) advances to directors, officers and other employees for |
• | enter into certain contracts, except in the ordinary course of business, and as would not (i) otherwise be prohibited by the merger agreement or (ii) reasonably be expected to have any adverse economic or other impact on IAA or its subsidiaries in any material respect when viewed in the context of the benefits received by IAA and its subsidiaries as a result thereof (A) enter into a contract that would be a material contract of IAA if it were in effect on the date of the original merger agreement or (B) materially modify, materially amend, terminate or assign or waive or assign any material rights under any material contract (other than, in the case of assignments, assignments to IAA or another subsidiary of IAA); |
• | waive, release, assign, settle or compromise or offer or propose to waive, release, assign, settle or compromise, any proceedings (excluding any proceeding in respect of taxes) except solely for monetary payments not covered by insurance of no more than $1,000,000 individually or $15,000,000 in the aggregate (or, if a reserve for such proceeding has been established on the consolidated balance sheet of IAA as of July 3, 2022 as included in IAA’s latest quarterly report, such greater amount that is covered by such reserve), on a basis that would not (a) prevent or materially delay consummation of the mergers or the transactions contemplated by the merger agreement or (b) result in the imposition of any term or condition that would restrict the future activity or conduct of RBA or its subsidiaries in any material respect (including IAA or any of its subsidiaries following the effective time, other than customary confidentiality and de minimis contractual obligations included in a settlement agreement that are incidental to an award of monetary damages thereunder) or a finding or admission of liability or a violation of law; |
• | make or commit to make any capital expenditures in an amount in the aggregate in excess of 110% of an agreed capital expenditure budget of IAA, other than to the extent reasonably necessary to repair or replace damaged facilities, property, equipment or other assets damaged following a casualty event or accident; |
• | split, combine, subdivide or reclassify any shares of capital stock or other equity interests of IAA; |
• | enter into any stockholder agreements, voting trusts or other agreements relating to the voting of, or providing registration rights with respect to, any shares of capital stock or other equity interests of IAA or any of its subsidiaries; or |
• | agree or commit to take any action that is prohibited above. |
• | offer, issue, deliver, grant or sell, or authorize or propose to offer, issue, deliver, grant or sell, any capital stock of, or other equity interests in, RBA or any of its subsidiaries or any securities convertible into, or any rights, warrants or options to acquire, any such capital stock or equity interests, other than (a) the grant of any awards (including RBA restricted stock units that are subject to time-based vesting, RBA restricted stock units that are subject to performance-based vesting or RBA’s deferred share units) under the RBA equity plans in the ordinary course of business (i)previously disclosed to IAA, (ii) to non-employee directors of RBA, (iii) to employees hired after the date of the original merger agreement and (iv) in connection with promotions, (b) pursuant to RBA’s 1999 Employee Stock Purchase Plan, as amended, (c) the issuance of RBA common shares issuable pursuant to the vesting, exercise or settlement of any equity awards pursuant to agreements in effect as of the date of the original merger agreement or entered into as permitted by the merger agreement, (d) dividend equivalent rights with respect to outstanding equity awards consistent with past practice in connection with RBA’s regular quarterly dividend, (e) pursuant to the RBA shareholder rights agreement, and (f) issuances by a wholly owned subsidiary of RBA of such subsidiary’s capital stock or other equity interests to RBA or any other wholly owned subsidiary of RBA; |
• | amend or propose to amend (i) RBA’s organizational documents or (ii) the organizational documents of any of US Holdings, Merger Sub 1 and Merger Sub 2 (other than ministerial changes); |
• | split, combine, subdivide or reclassify any shares of capital stock or other equity interests of RBA; |
• | (a) merge, consolidate, combine or amalgamate with any person (other than transactions between RBA and its wholly owned subsidiaries or between RBA’s wholly owned subsidiaries) or (b) acquire or agree to acquire (including by merging or consolidating with, purchasing any controlling equity interest in or a majority of the assets of, licensing, or by any other manner) any assets, properties, operations or businesses or any corporation, partnership, association or other business organization or division thereof, in the case of each of (a) and (b), to the extent that (i) the purchase price for any such individual transaction or series of related transactions exceeds $50,000,000 or (ii) such action would, or would reasonably be expected to, prevent, materially delay or materially impair the consummation of the transactions contemplated by the merger agreement; |
• | authorize, recommend, propose, enter into, adopt a plan or announce an intention to adopt a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization of RBA or any of its subsidiaries, other than such transactions among wholly owned subsidiaries of RBA; |
• | make, change or revoke any material tax election (but excluding any election that must be made periodically and is made consistent with past practice), change an annual tax accounting period, change any material tax accounting method, file any material amended tax return, enter into any material closing agreement with respect to taxes, settle or compromise any material proceeding regarding any taxes, surrender any right to claim a material tax refund or agree to an extension or waiver of the statute of limitations with respect to the assessment or determination of any material taxes (other than extensions of time to file tax returns), in each case to the extent that any such action would, or would reasonably be expected to, (a) prevent, materially delay or materially impair the consummation of the transactions or (b) prevent or impede IAA or RBA from delivering the executed tax certificates in connection with this joint proxy statement/prospectus and at closing; |
• | take any action (other than any action required or expressly contemplated by the merger agreement) or fail to take any action (other than any action expressly prohibited by the merger agreement) but, for the avoidance of doubt, without taking into account fluctuations in the fair market value of the RBA capital shares or the IAA capital stock after the date of the original merger agreement, where such action or failure to act would reasonably be expected to (a) prevent or impede the mergers from qualifying as a “reorganization,” within the meaning of Section 368(a) of the Code, (b) cause the IAA stockholders (other than any excepted shareholder) to recognize gain pursuant to Section 367(a)(1) of the Code, (c) cause RBA to be treated as a “domestic corporation” pursuant to Section 7874(b) of the Code as a result of the mergers, or (d) prevent or impede IAA or RBA from delivering the executed tax certificates in connection with this joint proxy statement/prospectus and at closing; |
• | sell, lease, swap, exchange, transfer, license, encumber (other than permitted encumbrances) or otherwise dispose of, or agree to sell, lease, swap, exchange, transfer, license, encumber (other than permitted encumbrances) or otherwise dispose of, any material portion of its assets or properties, other than (a) sales or dispositions of inventory in the ordinary course of business, (b) non-exclusive licenses in the ordinary course of business, (c) dispositions of obsolete or worthless equipment or other assets in the ordinary course of business, (d) leases, swaps, exchanges, encumbrances and other dispositions of leased real property or owned real property in the ordinary course of business or as previously disclosed to IAA and (e) other sales or dispositions of assets for which the consideration is less than $25,000,000 in the aggregate; |
• | change in any material respect its financial accounting principles, practices or methods that would materially affect the consolidated assets, liabilities or results of operations of RBA and its subsidiaries, except as required by applicable law, GAAP or stock exchange requirement; or |
• | agree or commit to take any action that is prohibited above. |
• | initiate, solicit, propose, knowingly encourage or knowingly facilitate any inquiry or the making of any proposal or offer that constitutes, or would reasonably be expected to lead to, an IAA competing proposal; |
• | engage in, continue or otherwise participate in any discussions or negotiations with any person with respect to, relating to, or in furtherance of an IAA competing proposal or any inquiry, proposal or offer that would reasonably be expected to lead to an IAA competing proposal; |
• | furnish any non-public information regarding IAA or its subsidiaries, or access to the properties, assets or employees of IAA or its subsidiaries, to any person in connection with or in response to any IAA competing proposal or any inquiry, proposal or offer that would reasonably be expected to lead to an IAA competing proposal; or |
• | terminate, amend, modify or waive any provision of any confidentiality, “standstill” or similar agreement to which it or any of its subsidiaries is a party; provided that, prior to, but not after, the time the IAA stockholder approval is obtained, if the IAA board determines that failure to do so would be inconsistent with its fiduciary duties under applicable law, it may waive any such “standstill” or similar provision to the extent necessary to permit a third party to make an IAA competing proposal, on a confidential basis, to the IAA board and communicate such waiver to the applicable third party. |
• | initiate, solicit, propose, knowingly encourage or knowingly facilitate any inquiry or the making of any proposal or offer that constitutes, or would reasonably be expected to lead to, an RBA competing proposal; |
• | engage in, continue or otherwise participate in any discussions or negotiations with any person with respect to, relating to, or in furtherance of an RBA competing proposal or any inquiry, proposal or offer that would reasonably be expected to lead to an RBA competing proposal; |
• | furnish any non-public information regarding RBA or its subsidiaries, or access to the properties, assets or employees of RBA or its subsidiaries, to any person in connection with or in response to any RBA competing proposal or any inquiry, proposal or offer that would reasonably be expected to lead to an RBA competing proposal; or |
• | terminate, amend, modify or waive any provision of any confidentiality, “standstill,” or similar agreement to which it or any of its subsidiaries is a party; provided that, prior to, but not after, the time the RBA shareholder approval is obtained, if the RBA board determines that failure to do so would be inconsistent with its fiduciary duties under applicable law, it may waive any such “standstill” or similar provision to the extent necessary to permit a third party to make an RBA competing proposal, on a confidential basis, to the RBA board and communicate such waiver to the applicable third party. |
• | promptly (and in any event within 24 hours of its receipt thereof) notify RBA of the receipt by IAA or, to the knowledge of IAA, any of its representatives, of any IAA competing proposal or any expression of interest, inquiry, proposal or offer with respect to an IAA competing proposal made on or after the date of the original merger agreement, any request for non-public information or data relating to IAA or any of its subsidiaries made by any person in connection with an IAA competing proposal or any request for discussions or negotiations with IAA or a representative of IAA relating to an IAA competing proposal (including the identity of such person, unless disclosure of the name of such person is prohibited by a confidentiality agreement in effect on the date of the original merger agreement), and IAA will provide to RBA promptly (and in any event within 24 hours) (i) an unredacted copy of any such expression of interest, inquiry, proposal or offer with respect to an IAA competing proposal made in writing provided to IAA or any of its subsidiaries or (ii) if any such expression of interest, inquiry, proposal or offer with respect to an IAA competing proposal is not (or any portion thereof is not) made in writing, a written summary of the material financial and other terms thereof; and |
• | keep RBA reasonably informed, on a reasonably prompt basis of any material development regarding the status or terms of any such expressions of interest, proposals or offers (including any material amendments thereto) and provide to RBA as soon as practicable after receipt or delivery thereof (and in any event within 24 hours) copies of all material written correspondence and other material written materials provided to IAA or its representatives from any person with respect to an IAA competing proposal. |
• | promptly (and in any event within 24 hours of its receipt thereof) notify IAA of the receipt by RBA or, to the knowledge of RBA, any of its representatives, of any RBA competing proposal or any expression of interest, inquiry, proposal or offer with respect to an RBA competing proposal made on or after the date |
• | keep IAA reasonably informed, on a reasonably prompt basis of any material development regarding the status or terms of any such expressions of interest, proposals or offers (including any material amendments thereto) and provide to IAA as soon as practicable after receipt or delivery thereof (and in any event within 24 hours) copies of all material written correspondence and other material written materials provided to RBA or its representatives from any person with respect to an RBA competing proposal. |
• | An “IAA competing proposal” is any proposal, offer or indication of interest relating to any transaction or series of related transactions (other than transactions only with RBA or any of its subsidiaries) involving, directly or indirectly: (i) any acquisition (by asset purchase, stock purchase, merger, or otherwise) by any person or group of any business or assets of IAA or any of its subsidiaries (including capital stock of or ownership interest in any subsidiary) that accounted for or generated 20% or more of IAA’s and its subsidiaries’ consolidated assets (by fair market value) or net revenue for the latest preceding 12 month period for which consolidated financial statements are available, (ii) any acquisition of beneficial ownership by any person or group holding 20% or more of the outstanding shares of IAA common stock and any other securities entitled to vote on the election of directors or any tender or exchange offer that if consummated would result in any person or group beneficially owning 20% or more of the outstanding shares of IAA common stock and any other securities entitled to vote on the election of directors or (iii) any merger, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or similar transaction involving IAA or any of its subsidiaries which would result in any person or group acquiring beneficial ownership of at least 20% of the outstanding common stock and other securities entitled to vote on the election of directors of the entity surviving such transaction. |
• | A “RBA competing proposal” means any proposal, offer or indication of interest relating to any transaction or series of related transactions (other than transactions only with IAA or any of its subsidiaries) involving, directly or indirectly: (i) any acquisition (by asset purchase, stock purchase, merger, or otherwise) by any person or group of any business or assets of RBA or any of its subsidiaries (including capital stock of or ownership interest in any subsidiary) that accounted for or generated 20% or more of RBA’s and its subsidiaries’ consolidated assets (by fair market value) or net revenue for the latest preceding 12 month period for which consolidated financial statements are available, (ii) any acquisition of beneficial ownership by any person or group holding 20% or more of the outstanding RBA common shares and any other securities entitled to vote on the election of directors or any tender or exchange offer that if consummated would result in any person or group beneficially owning 20% or more of the outstanding RBA common shares and any other securities entitled to vote on the election of directors or (iii) any merger, consolidation, share exchange, plan of arrangement, business combination, recapitalization, liquidation, dissolution or similar transaction involving RBA or any of its subsidiaries which would result in any person or group acquiring beneficial ownership of at least 20% of the outstanding RBA common shares and other securities entitled to vote on the election of directors of the entity surviving such transaction. |
• | An “IAA superior proposal” means a bona fide written IAA competing proposal that in the good faith determination of the IAA board, after consultation with IAA’s financial advisors, (i) if consummated, would result in a transaction more favorable to IAA’s stockholders from a financial point of view than the mergers (after taking into account the time likely to be required to consummate such proposal and any binding adjustments or revisions to the terms of the merger agreement offered in writing by RBA in response to |
• | A “RBA superior proposal” means a bona fide written RBA competing proposal that in the good faith determination of the RBA board, after consultation with RBA’s financial advisors, (i) if consummated, would result in a transaction more favorable to holders of RBA common shares from a financial point of view than the mergers (after taking into account the time likely to be required to consummate such proposal and any binding adjustments or revisions to the terms of the merger agreement offered by IAA in writing in response to such proposal in accordance with the terms of the merger agreement) and (ii) is reasonably likely to be consummated on the terms proposed, taking into account any legal, financial, regulatory and stockholder approval requirements, the sources, availability and terms of any financing, financing market conditions and the existence of a financing contingency, the likelihood of termination, the timing of closing, the identity of the person or persons making the proposal and any other aspects considered relevant by the RBA board; provided, however, that, for purposes of this definition of “RBA superior proposal,” any reference in the definition of RBA competing proposal to “20%” will be deemed to be a reference to “more than 50%.” |
• | the occurrence of the RBA and IAA special meetings by RBA and IAA, as applicable, and the approval of each of the IAA merger proposal by the IAA stockholders at the IAA special meeting and of the RBA share issuance proposal by the RBA shareholders at the RBA special meeting; |
• | cooperation between IAA and RBA in the preparation of this joint proxy statement/prospectus and the related registration statement and in obtaining the clearance of such documents from the SEC and applicable Canadian securities regulatory authorities (to the extent required); |
• | confidentiality and access by each party to certain information about the other party during the period prior to the effective time; |
• | cooperation between IAA and RBA in the defense or settlement of any litigation, including stockholder litigation relating to the mergers; |
• | consultation between IAA and RBA in connection with public announcements related to the transactions; |
• | RBA’s and IAA’s agreement to effect resolutions by its board of directors causing any dispositions of IAA equity securities (including derivative securities) resulting from the mergers, and any acquisitions of RBA common shares resulting from the mergers, by certain officers and directors of IAA and RBA who are, or will become, subject to the reporting requirements of Section 16(a) of the Exchange Act, to be exempt from Section 16(b) of the Exchange Act; |
• | cooperation between IAA and RBA in the listing of the RBA common shares, to be issued pursuant to the RBA share issuance, to be approved for listing on the NYSE and the TSX, and the delisting of the IAA common stock from the NYSE; |
• | the reasonable best efforts of RBA, US Holdings and IAA to cause the mergers, taken together, to qualify as a reorganization within the meaning of Section 368(a) of the Code and for an exception to the general rule of Section 367(a)(1) of the Code; |
• | IAA’s and RBA’s use of their respective reasonable best efforts to provide the representations of their respective officers required in connection with the issuance from Cooley LLP, counsel to IAA, or another nationally recognized tax counsel, to the effect that, on the basis of facts, representations and assumptions set forth or referred to in such opinion, the mergers will qualify as a “reorganization” within the meaning of Section 368(a) of the Code and that the mergers will not result in gain recognition pursuant to Section 367(a)(1) of the Code by persons who are IAA stockholders immediately prior to the effective time (other than any excepted shareholder) and IAA’s use of reasonable best efforts to obtain such opinion; |
• | reasonable steps to be taken by the parties to exempt the transactions contemplated by the merger agreement from any anti-takeover laws; and |
• | the delivery to RBA by IAA resignations of each director of IAA who is not continuing as a director of the surviving corporation following the effective time. |
• | maintain in full force and effect the debt commitment letter (and to the extent that the revolving amendment (as described in the debt commitment letter) is consummated in accordance with the debt commitment letter such that commitments thereunder are automatically reduced or terminated, RBA’s existing credit facility); |
• | promptly negotiate and enter into definitive agreements with respect to the financing on the terms and conditions contained in the debt commitment letter, taking into account any market flex provisions (or, except to the extent agreed to by IAA, on terms no less favorable to RBA than the terms and conditions in the debt commitment letter); |
• | satisfy (unless waived) on a timely basis all conditions precedent to funding in the debt commitment letter (and following the consummation of the amendment, RBA’s existing credit facility) and to consummate the financing at or prior to the closing of the transactions; |
• | comply with its obligations under the debt commitment letter (and following the consummation of the amendment, RBA’s existing credit facility); and |
• | consummate the financing at or prior to the closing date of the transactions (including drawing on any interim or bridge financing provided under the debt commitment letter or drawing on the revolving credit facility under RBA’s existing credit facility on the closing date to the extent necessary to obtain the cash amounts required under the merger agreement). |
• | cause the participation by applicable management and representatives of IAA, with appropriate seniority and expertise, in a reasonable number of meetings, presentations, roadshows, conference calls, drafting sessions, due diligence sessions and meetings with prospective lenders and other financing sources (including customary one-on-one meetings), investors and ratings agencies, including direct contact between representatives of IAA and its subsidiaries, on the one hand, and the financing sources, on the other hand; |
• | assist RBA or the financing sources with the preparation of customary bank books, confidential information memoranda, offering memoranda, private placement memoranda, lender and investor presentations, rating agency presentations and other customary documents required or requested by the financing sources in connection with the financing (including any alternative financing), including in the preparation of “public side” versions thereof and assisting RBA and its respective affiliates in obtaining any corporate or facility ratings from any ratings agencies contemplated by the financing; |
• | furnish RBA and the financing sources reasonably promptly with the required financial information and such other pertinent customary financial and other customary information (including that required for the management discussion and analysis and business descriptions of this joint proxy statement/prospectus) regarding IAA and its subsidiaries as required or reasonably requested by RBA or the financing sources and with information in response to due diligence requests of, and otherwise cooperate with the due diligence efforts of, the financing sources, and execute and deliver (A) customary authorization letters to accompany and customary marketing materials regarding the accuracy and completeness of information contained in such marketing materials with respect to IAA and its subsidiaries and, with respect to any “public version” of such marketing materials, the lack of material non-public information with respect to IAA and its subsidiaries therein and (B) customary management representation letters and chief financial officer certificates with respect to the financial information included in the marketing materials for securities offerings; |
• | assist and provide customary information to assist RBA and its respective affiliates and representatives in preparing pro forma financial statements; |
• | furnish any information relating to the capitalization of IAA after giving effect to the closing and any assumed cost savings, synergies and similar adjustments (if any) for the transactions; |
• | furnish promptly, or at least three business days prior to the closing date (to the extent requested at least ten business days prior to the closing date), all documentation and other information to the extent required under the debt commitment letter in connection with applicable “know your customer” and anti-money laundering rules and regulations, including, without limitation, the U.S.A. Patriot Act of 2001 and rules adopted by the Financial Crimes Enforcement Network of the U.S. Treasury Department, but in each case, solely as relating to IAA and its subsidiaries; |
• | obtain, execute and deliver customary evidence of authority, customary officer’s certificates, customary solvency certificates, customary insurance certificates, in each case, as required or reasonably requested by RBA or the financing sources; |
• | provide reasonable assistance in the preparation and execution of the definitive documentation in connection with the financing, including (A) executing and delivering by IAA and its subsidiaries, effective only upon the closing, of, or completing any schedules, exhibits and annexes with respect to, any credit agreements, guarantees, pledge and security documents, intercreditor agreements, purchase agreements, indentures, other definitive financing documents, opinion letters (or any Investment Company Act calculations or analysis with respect thereto) or other certificates or documents contemplated by the financing, hedging agreements reasonably requested by RBA or any financing source (or any counsel to any of the foregoing) and otherwise facilitating the creation, perfection and priority of any security interests in the collateral contemplated by the financing, (B) at least five business days prior to the closing date, obtaining draft payoff letters and other customary draft lien terminations, and releases and other instruments of termination, redemption, satisfaction or discharge (including, without limitation, UCC-3 or equivalent financing terminations, intellectual property terminations, control agreement terminations and landlord waiver terminations) in respect of IAA’s existing credit facility (and evidence that notice of such repayment and lien release has been timely delivered), (C) preparing any documents and instruments required in connection with the senior notes redemption and (D) obtaining such consents, acknowledgements, authorizations, approvals and instruments required or reasonably requested by RBA or any financing source to permit the consummation of the financing, the payoff and termination of IAA’s existing credit facility and the consummation of the senior notes redemption; and |
• | facilitating customary cooperation and assistance of IAA’s and its subsidiaries’ auditors, including, but not limited to, causing IAA’s and its subsidiaries’ independent auditors to provide on a timely basis customary comfort letters (including customary “negative assurance,” or assurances based on a lack of contrary facts, comfort and change period comfort) with respect to historical financial information of IAA included in any offering memoranda with respect to any non-convertible high yield debt securities included in the financing issued on a “Rule 144A for life” basis, requiring repayment of the total principal amount at maturity with no amortization, and reasonable and customary assistance with the drafting sessions and due diligence activities of the financing sources (including providing reasonable access to documentation and records of IAA and its subsidiaries) in connection with the preparation of any offering memoranda and providing customary consents, if any, to the inclusion of audit reports in any applicable offering memoranda. |
• | the adoption of the merger agreement by the holders of a majority of the outstanding shares of IAA common stock entitled to vote thereon; |
• | the approval of the RBA share issuance by the affirmative vote of a majority of the votes cast by RBA shareholders entitled to vote thereon and present in person or represented by proxy at the RBA special meeting; |
• | the expiration or termination of any waiting period under the HSR Act, the Competition Act approval and the consent, waiver, authorization or approval of the applicable antitrust regulatory authority in certain specified non-U.S. jurisdictions having been obtained (the “regulatory clearance condition”); |
• | the absence of any order, decree, injunction or regulation by a court or other governmental entity that prevents or materially impairs the consummation of the mergers; |
• | the effectiveness of the registration statement of which this joint proxy statement/prospectus forms a part and the absence of a stop order or proceedings threatened or initiated by the SEC for that purpose; and |
• | the RBA common shares to be issued pursuant to the mergers having been approved for listing on the NYSE and the TSX. |
• | the representations and warranties of IAA relating to (i) organization, standing and power, (ii) certain capitalization matters and related matters, (iii) authority, no violation, consents and approvals, (iv) opinion of financial advisor and (v) brokers being true and correct in all material respects as of the date of the original merger agreement and as of the closing of the mergers (other than those representations and warranties that speak as of a specified date or period of time, which will have been true and correct in all material respects only as of such date or period of time); |
• | the representations and warranties of IAA relating to certain capitalization and related matters and the non-occurrence of any material adverse effect on IAA being true and correct in all respects (except, in the case of capitalization matters, for de minimis inaccuracies for such inaccuracies as are de minimis in the aggregate), as of the date of the original merger agreement and as of the closing of the mergers (other than those representations and warranties that speak as of a specified date or period of time, which will have been true and correct in all respects only as of such date or period of time); |
• | all other representations and warranties of IAA being true and correct both as of the date of the original merger agreement and as of the closing of the mergers (other than those representations and warranties that speak as of a specified date or period of time, which will have been true and correct in all material respects only as of such date or period of time), other than where the failure of these representations and warranties to be true and correct (without giving effect to any materiality or material adverse effect qualifications contained in such representations and warranties) does not have, and would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on IAA; |
• | IAA’s having performed or complied with, in all material respects, all of its agreements and covenants under the merger agreement required to be performed or complied with at or prior to the effective time; |
• | no material adverse effect on IAA having occurred after the date of the original merger agreement that is continuing; and |
• | RBA’s receipt of a certificate executed by an executive officer of IAA certifying as to the satisfaction of the conditions described in the preceding bullets. |
• | the representations and warranties of RBA relating to (i) organization, standing and power (ii) certain capitalization and related matters, (iii) authority, no violation, consents and approvals, (iv) opinion of financial advisor and (v) brokers being true and correct in all material respects as of the date of the original merger agreement and as of the closing of the mergers (other than those representations and warranties that speak as of a specified date or period of time, which will have been true and correct in all material respects only as of such date or period of time); |
• | the representations and warranties of RBA relating to certain capitalization and related matters and the non-occurrence of a material adverse effect on RBA being true and correct in all respects (except, in the case of capitalization matters, for de minimis inaccuracies), as of the date of the original merger agreement and as of the closing of the mergers (other than those representations and warranties that speak as of a specified date or period of time, which will have been true and correct in all material respects only as of such date or period of time); |
• | all other representations and warranties of RBA being true and correct both as of the date of the original merger agreement and as of the closing of the mergers (other than those representations and warranties that speak as of a specified date or period of time, which will have been true and correct in all material respects only as of such date or period of time), other than where the failure of these representations and warranties to be true and correct (without giving effect to any materiality qualifications contained in such representations and warranties) does not have, and would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on RBA; |
• | RBA, US Holdings, Merger Sub 1 and Merger Sub 2 having performed or complied with, in all material respects, all of its agreements and covenants under the merger agreement at or prior to the effective time; |
• | no material adverse effect on RBA having occurred after the date of the original merger agreement that is continuing; |
• | IAA’s receipt of a certificate executed by an executive officer of RBA certifying as to the satisfaction of the conditions described in the preceding bullets; and |
• | IAA’s receipt of a written opinion from Cooley LLP, counsel to IAA, or another nationally recognized tax counsel, to the effect that, on the basis of facts, representations and assumptions set forth or referred to in such opinion, the mergers will qualify as a “reorganization” within the meaning of Section 368(a) of the Code and that the mergers will not result in gain recognition pursuant to Section 367(a)(1) of the Code by persons who are IAA stockholders immediately prior to the effective time (other than any excepted shareholder). |
• | by mutual written consent of IAA and RBA; |
• | by either IAA or RBA: |
○ | if any governmental entity has issued any order, decree, ruling or injunction or taken any other similar binding action permanently restraining, enjoining or otherwise prohibiting the consummation of the mergers or permanently preventing the satisfaction of the conditions to each party’s obligation to consummate the mergers, and such order, decree, ruling or injunction or other action will have become final and non-appealable, or if there will be any law enacted after the date of the original merger agreement that permanently makes consummation of any of the mergers illegal or otherwise permanently prohibited, except that this right to terminate the merger agreement is not be available to any party (i) whose failure to fulfill any covenant or agreement under the merger agreement has been the primary cause of or resulted in the action or event described above occurring or (ii) that failed to comply with its obligations under the merger agreement to prevent the entry of or remove such order, decree, ruling, injunction or law in any material respect; |
○ | if the mergers have not been consummated on or prior to August 7, 2023 (as such date may be extended pursuant to the following proviso, “the outside date”); provided, however, that (i) if the marketing period has commenced but not been completed by the date that is four business days prior to such date, the outside date will be extended to 5:00 p.m. New York City time on the fourth business day following the final day of the marketing period and (ii) this right to terminate the merger agreement will not be available to any party whose failure to fulfill any covenant or agreement under the merger agreement has been the primary cause of or resulted in the failure of the mergers to occur on or before such date; |
○ | in the event of a breach by the other party of any representation, warranty, covenant or other agreement contained in the merger agreement which would give rise to the failure of a bring-down condition of a party, if it was continuing as of the closing (and such breach is not curable prior to the outside date, or if curable prior to the outside date, has not been cured by the earlier of (i) 30 days after the giving of written notice to the breaching party of such breach and (ii) two business days prior to the outside date); provided, however, that the terminating party is not then in similar breach of any representation, warranty, covenant or other agreement contained in the merger agreement; or |
○ | if (i) the IAA stockholder approval has not have been obtained upon a vote at the IAA special meeting, or (ii) the RBA shareholder approval has not have been obtained upon a vote at the RBA special meeting; provided that this right to terminate the merger agreement will not be available to any party whose failure to fulfill any covenant or agreement under the merger agreement has been the primary cause of or resulted in the failure of the IAA stockholder approval or RBA shareholder approval, as applicable, to be obtained; |
• | by RBA: |
○ | if, prior to the IAA stockholder approval, the IAA board or a committee thereof has effected an IAA change of recommendation (whether or not permitted) (an “IAA change of recommendation termination”); or |
○ | if prior to the RBA shareholder approval, (i) RBA has received an RBA superior proposal, (ii) the RBA board or a committee thereof has authorized RBA to enter into a definitive alternative acquisition agreement to consummate the transaction contemplated by that RBA superior proposal (and immediately following such termination, RBA enters into such definitive alternative acquisition agreement), (iii) RBA has complied in all material respects with the terms of the merger agreement with respect to such RBA superior proposal, and (iv) concurrently with (and as a condition to) such termination, RBA pays IAA the applicable termination amount (an “RBA superior proposal termination”); |
• | by IAA: |
○ | if, prior to the RBA shareholder approval, the RBA board or a committee thereof has effected an RBA change of recommendation (whether or not permitted) (an “RBA change of recommendation termination”); or |
○ | if prior to the IAA stockholder approval, (i) IAA has received an IAA superior proposal, (ii) the IAA board or a committee thereof has authorized IAA to enter into a definitive alternative acquisition agreement to consummate the transaction contemplated by that IAA superior proposal (and immediately following such termination, IAA enters into such definitive alternative acquisition agreement), (iii) IAA has complied in all material respects with the terms of the merger agreement with respect to such IAA superior proposal, and (iv) concurrently with (and as a condition to) such termination, IAA pays RBA the termination amount (an “IAA superior proposal termination”). |
• | upon an IAA superior proposal termination or an IAA change of recommendation termination; |
• | (i) RBA or IAA terminates the merger agreement because the IAA stockholder approval was not obtained, (ii) on or before the date of such termination an IAA competing proposal has been publicly announced or publicly disclosed and not been publicly withdrawn without qualification at least five business days prior to the IAA special meeting and (iii) within 12 months following the termination of the merger agreement, IAA (A) enters into a definitive agreement with the party making such IAA competing proposal (or publicly approves or recommends to IAA’s stockholders or otherwise does not oppose, in the case of a tender or exchange offer, an IAA competing proposal from such party), or (B) consummates a transaction with respect to any IAA competing proposal (except that, for this purpose, each reference to “more than 20%” in the definition of IAA competing proposal is deemed to be a reference to “more than 50%”); or |
• | (i) (A) IAA terminates the merger agreement because of a failure of the closing of the mergers to occur on or before the outside date at a time when RBA would be permitted to terminate the merger agreement |
• | upon an RBA superior proposal termination or an RBA change of recommendation termination; |
• | (i) RBA or IAA terminates the merger agreement because the RBA shareholder approval was not obtained, (ii) on or before the date of such termination an RBA competing proposal shall have been publicly announced or publicly disclosed and not been publicly withdrawn without qualification at least five business days prior to the RBA special meeting and (iii) within 12 months following the termination of the merger agreement, RBA (A) enters into a definitive agreement with the party making such RBA competing proposal (or publicly approves or recommends to RBA’s shareholders or otherwise does not oppose, in the case of a tender or exchange offer, an RBA competing proposal from such party), or (B) consummates a transaction with respect to any RBA competing proposal (except that, for this purpose, each reference to “more than 20%” in the definition of RBA competing proposal is deemed to be a reference to “more than 50%”); |
• | (i) (A) RBA terminates the merger agreement because of a failure of the closing of the mergers to occur on or before the outside date at a time when IAA would be permitted to terminate the merger agreement because of a breach by RBA of a covenant in the merger agreement causing a failure of a closing condition or (B) IAA terminates the merger agreement because of a breach by RBA of a covenant of the merger agreement causing a failure of a closing condition, (ii) on or before the date of such termination an RBA competing proposal has been publicly announced or publicly disclosed and not been publicly withdrawn without qualification at least five business days prior to such termination and (iii) within 12 months following the termination of the merger agreement, RBA (A) enters into a definitive agreement with the party making such RBA competing proposal (or publicly approves or recommends to RBA’s shareholders or otherwise does not oppose, in the case of a tender or exchange offer, an RBA competing proposal from such party), or (B) consummates a transaction with respect to any RBA competing proposal (except that, for this purpose, each reference to “more than 20%” in the definition of RBA competing proposal is deemed to be a reference to “more than 50%”). |
• | $12.80 in cash, without interest (“cash consideration”); and |
• | 0.5252 RBA common shares (“share consideration”). |
(a) | the quotient obtained by dividing (i) the cash consideration by (ii) the volume weighted average trading sale price of one share of RBA common shares for the five consecutive trading days immediately prior to the closing, and |
(b) | the exchange ratio. |
• | the historical audited consolidated financial statements of RBA as of and for the year ended December 31, 2021, included in RBA’s Annual Report on Form 10-K filed with the SEC on February 17, 2022; |
• | the historical unaudited condensed consolidated financial statements of RBA as of and for the nine months ended September 30, 2022, included in RBA’s Quarterly Report on Form 10-Q filed with the SEC on November 7, 2022; |
• | the historical audited consolidated financial statements of IAA as of and for the fiscal year ended January 2, 2022, included in IAA’s Annual Report on Form 10-K filed with the SEC on February 28, 2022; and |
• | the historical unaudited condensed consolidated financial statements of IAA as of and for the nine months ended October 2, 2022, included in IAA’s Quarterly Report on Form 10-Q filed with the SEC on November 9, 2022. |
| | Historical | | | | | | | | | | | | | | | |||||||||||
| | Ritchie Bros. Auctioneers Incorporated | | | IAA, Inc. | | | | | | | | | | | | | | | ||||||||
| | As of September 30, 2022 | | | As of October 2, 2022 | | | Transaction Accounting Adjustments - Reclassification | | | Notes | | | Transaction Accounting Adjustments - Financing | | | Notes | | | Transaction Accounting Adjustments - Acquisition | | | Notes | | | Pro Forma Combined | |
ASSETS | | | | | | | | | | | | | | | | | | | |||||||||
Current assets: | | | | | | | | | | | | | | | | | | | |||||||||
Cash and cash equivalents | | | $439 | | | $146 | | | $ — | | | | | $2,684 | | | 4(a) | | | $(56) | | | 5(a) | | | $617 | |
| | | | | | | | | | 500 | | | 4(b) | | | (2,877) | | | 5(b) | | | ||||||
| | | | | | | | | | | | | | (99) | | | 5(c) | | | ||||||||
| | | | | | | | | | | | | | (120) | | | 5(d) | | | ||||||||
Restricted cash | | | 76 | | | — | | | — | | | | | — | | | | | — | | | | | 76 | |||
Trade and other receivables | | | 307 | | | 427 | | | — | | | | | — | | | | | — | | | | | 734 | |||
Less: allowance for credit losses | | | (4) | | | (9) | | | — | | | | | — | | | | | — | | | | | (13) | |||
Prepaid consigned vehicle charges | | | — | | | 61 | | | — | | | | | — | | | | | (61) | | | 5(b) | | | — | ||
Inventory | | | 101 | | | — | | | 48 | | | 2(a) | | | — | | | | | — | | | | | 149 | ||
Income taxes receivable | | | 7 | | | — | | | 4 | | | 2(b) | | | — | | | | | — | | | | | 11 | ||
Other current assets | | | 28 | | | 78 | | | (48) | | | 2(a) | | | — | | | | | — | | | | | 54 | ||
| | | | | | (4) | | | 2(b) | | | | | | | | | | | ||||||||
Total current assets | | | 954 | | | 703 | | | — | | | | | 3,184 | | | | | (3,213) | | | | | 1,628 | |||
Non-current assets: | | | | | | | | | | | | | | | | | | | |||||||||
Property, plant and equipment | | | 445 | | | 368 | | | — | | | | | — | | | | | 250 | | | 5(b) | | | 1,063 | ||
Operating lease right-of-use assets | | | — | | | 1,146 | | | 117 | | | 2(c) | | | — | | | | | 3 | | | 5(b) | | | 1,266 | |
Other non-current assets | | | 148 | | | 30 | | | (117) | | | 2(c) | | | — | | | | | — | | | | | 61 | ||
Intangible assets | | | 323 | | | 185 | | | — | | | | | — | | | | | 2,155 | | | 5(b) | | | 2,663 | ||
Goodwill | | | 947 | | | 749 | | | — | | | | | — | | | | | 3,782 | | | 5(b) | | | 5,478 | ||
Deferred tax assets | | | 6 | | | — | | | — | | | | | — | | | | | — | | | | | 6 | |||
Total assets | | | $2,823 | | | $3,181 | | | $— | | | | | $3,184 | | | | | $2,977 | | | | | $12,165 |
| | Historical | | | | | | | | | | | | | | | |||||||||||
| | Ritchie Bros. Auctioneers Incorporated | | | IAA, Inc. | | | | | | | | | | | | | | | ||||||||
| | As of September 30, 2022 | | | As of October 2, 2022 | | | Transaction Accounting Adjustments - Reclassification | | | Notes | | | Transaction Accounting Adjustments - Financing | | | Notes | | | Transaction Accounting Adjustments - Acquisition | | | Notes | | | Pro Forma Combined | |
LIABILITIES. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND EQUITY | | | | | | | | | | | | | | | | | | | |||||||||
Current liabilities: | | | | | | | | | | ||||||||||||||||||
Auction proceeds payable | | | $441 | | | $— | | | $7 | | | 2(d) | | | $— | | | | | $— | | | | | $448 | ||
Trade and other liabilities | | | 266 | | | 196 | | | (12) | | | 2(c) | | | — | | | | | 7 | | | 5(b) | | | 552 | |
| | | | | | (7) | | | 2(d) | | | | | | | | | | | ||||||||
| | | | | | 102 | | | 2(e) | | | | | | | | | | | ||||||||
Short-term right-of-use operating lease liabilities | | | — | | | 88 | | | 12 | | | 2(c) | | | — | | | | | 64 | | | 5(b) | | | 164 | |
Accrued employee benefits and compensation expenses | | | — | | | 27 | | | (27) | | | 2(e) | | | — | | | | | — | | | | | — | ||
Other accrued expenses | | | — | | | 77 | | | (2) | | | 2(b) | | | — | | | | | — | | | | | — | ||
| | | | | | (75) | | | 2(e) | | | | | | | | | | | ||||||||
Income taxes payable | | | 39 | | | — | | | 2 | | | 2(b) | | | — | | | | | — | | | | | 41 | ||
Short-term debt | | | 2 | | | — | | | — | | | | | — | | | | | — | | | | | 2 | |||
Current portion of long-term debt | | | 4 | | | 33 | | | — | | | | | 969 | | | 4(a) | | | (33) | | | 5(b) | | | 973 | |
Total current liabilities | | | 752 | | | 421 | | | — | | | | | 969 | | | | | 38 | | | | | 2,180 | |||
Non-current liabilities: | | | | | | | | | | | | | | | | | | | |||||||||
Long-term debt | | | 633 | | | 1,098 | | | — | | | | | 1,715 | | | 4(a) | | | (1,098) | | | 5(b) | | | 2,348 | |
Long-term right-of-use operating lease liabilities | | | — | | | 1,104 | | | 104 | | | 2(c) | | | — | | | | | (107) | | | 5(b) | | | 1,101 | |
Other non-current liabilities | | | 138 | | | 24 | | | (104) | | | 2(c) | | | — | | | | | (1) | | | 5(b) | | | 57 | |
Deferred tax liabilities | | | 61 | | | 70 | | | — | | | | | — | | | | | 578 | | | 5(b) | | | 709 | ||
Total liabilities | | | 1,584 | | | 2,717 | | | — | | | | | 2,684 | | | | | (590) | | | | | 6,395 | |||
| | | | | | | | | | | | | | | | | | ||||||||||
Commitments and contingencies | | | — | | | — | | | — | | | | | — | | | | | — | | | | | — | |||
Series A senior preferred shares | | | — | | | — | | | — | | | | | 485 | | | 4(b) | | | — | | | | | 485 | ||
| | | | | | | | | | | | | | | | | | ||||||||||
Stockholder's Equity: | | | | | | | | | | | | | | | | | | | |||||||||
Preferred stock | | | — | | | — | | | — | | | | | — | | | | | — | | | | | — | |||
Common stock | | | 239 | | | 1 | | | — | | | | | 15 | | | 4(b) | | | (1) | | | 5(b) | | | 254 | |
Treasury stock | | | — | | | (61) | | | — | | | | | — | | | | | 61 | | | 5(b) | | | — | ||
Additional paid-in capital | | | 82 | | | 22 | | | — | | | | | — | | | | | 4,228 | | | 5(b) | | | 4,332 | ||
Retained earnings | | | 1,028 | | | 577 | | | — | | | | | — | | | | | (56) | | | 5(a) | | | 809 | ||
| | | | | | | | | | | | | | (521) | | | 5(b) | | | ||||||||
| | | | | | | | | | | | | | (99) | | | 5(c) | | | ||||||||
| | | | | | | | | | | | | | (120) | | | 5(d) | | | ||||||||
Accumulated other comprehensive loss | | | (110) | | | (75) | | | — | | | | | — | | | | | 75 | | | 5(b) | | | (110) | ||
Non-controlling interest | | | — | | | — | | | — | | | | | — | | | | | — | | | | | — | |||
Total stockholder's equity | | | 1,239 | | | 464 | | | — | | | | | 15 | | | | | 3,567 | | | | | 5,285 | |||
Total liabilities, redeemable convertible preferred shares and stockholder's equity | | | $2,823 | | | $3,181 | | | $— | | | | | $3,184 | | | | | $2,977 | | | | | $12,165 |
| | Historical | | | | | | | | | | | | | | | | | ||||||||||||
| | Ritchie Bros. Auctioneers Incorporated | | | IAA, Inc. | | | | | | | | | | | | | | | | | |||||||||
| | Nine months ended September 30, 2022 | | | Nine months ended October 2, 2022 | | | Transaction Accounting Adjustments - Reclassification | | | Notes | | | Transaction Accounting Adjustments - Financing | | | Notes | | | Transaction Accounting Adjustments - Acquisition | | | Notes | | | Pro Forma Combined | | | ||
Revenue: | | | | | | | | | | | | | | | | | | | | | ||||||||||
Service revenue | | | $778 | | | $ 1,250 | | | $ — | | | | | $ — | | | | | $ — | | | | | $2,028 | | | ||||
Inventory sales revenue | | | 512 | | | 326 | | | — | | | | | — | | | | | — | | | | | 838 | | | ||||
Total revenue | | | 1,290 | | | 1,576 | | | — | | | | | — | | | | | — | | | | | 2,866 | | | ||||
| | | | | | | | | | | | | | | | | | | | |||||||||||
Operating expenses: | | | | | | | | | | | | | | | | | | | | | ||||||||||
Cost of services | | | 126 | | | 739 | | | — | | | | | — | | | | | — | | | | | 865 | | | ||||
Cost of inventory sold | | | 455 | | | 293 | | | — | | | | | — | | | | | — | | | | | 748 | | | ||||
Selling, general and administrative expenses | | | 404 | | | 153 | | | — | | | | | — | | | | | (9) | | | 6(e) | | | 551 | | | |||
| | | | | | | | | | | | | | 3 | | | 6(f) | | | | | |||||||||
Acquisition-related costs | | | 15 | | | — | | | — | | | | | — | | | | | — | | | | | 15 | | | ||||
Depreciation and amortization expenses | | | 73 | | | 78 | | | — | | | | | — | | | | | (46) | | | 6(a) | | | 294 | | | |||
| | | | | | | | | | | | | | 189 | | | 6(b) | | | | | |||||||||
Foreign exchange loss (gain) | | | (1) | | | — | | | 9 | | | 2(g) | | | — | | | | | — | | | | | 8 | | | |||
Total operating expenses, net | | | 1,072 | | | 1,263 | | | 9 | | | | | — | | | | | 137 | | | | | 2,481 | | | ||||
Gain on disposition of property, plant and equipment | | | 170 | | | — | | | 2 | | | 2(h) | | | — | | | | | — | | | | | 172 | | | |||
Operating income | | | 388 | | | 313 | | | (7) | | | | | — | | | | | (137) | | | | | 557 | | | ||||
| | | | | | | | | | | | | | | | | | | | |||||||||||
Interest expense | | | (48) | | | (36) | | | — | | | | | (182) | | | 4(c) | | | 36 | | | 6(c) | | | (230) | | | ||
Change in fair value of derivatives, net | | | 1 | | | — | | | — | | | | | — | | | | | — | | | | | 1 | | | ||||
Other income (expense), net | | | 6 | | | (8) | | | 9 | | | 2(g) | | | — | | | | | — | | | | | 5 | | | |||
| | | | | | (2) | | | 2(h) | | | | | | | | | | | | | |||||||||
Income before income taxes | | | 347 | | | 269 | | | — | | | | | (182) | | | | | (101) | | | | | 333 | | | ||||
| | | | | | | | | | | | | | | | | | | | |||||||||||
Income tax expense (benefit) | | | 73 | | | 54 | | | — | | | | | (44) | | | 4(d) | | | (24) | | | 4(d) | | | 59 | | | ||
Net income (loss) | | | $274 | | | $215 | | | $— | | | | | $(138) | | | | | $(77) | | | | | $274 | | | ||||
| | | | | | | | | | | | | | | | | | | | |||||||||||
Cumulative dividends on Series A senior preferred shares | | | — | | | — | | | — | | | | | (20) | | | 4(e) | | | — | | | | | (20) | | | |||
Allocated earnings to participating securities | | | — | | | — | | | — | | | | | (9) | | | 4(e) | | | — | | | | | (9) | | | |||
| | | | | | | | | | | | | | | | | | | | |||||||||||
Net income (loss) attributable to: | | | | | | | | | | | | | | | | | | | | | ||||||||||
Common stockholders | | | $274 | | | $215 | | | $— | | | | | $(167) | | | | | $(77) | | | | | $245 | | | ||||
Non-controlling interests | | | — | | | — | | | — | | | | | — | | | | | — | | | | | — | | | ||||
| | | | | | | | | | | | | | | | | | | | |||||||||||
Earnings per share attributable to common stockholders: | | | | | | | | | | | | | | | | | | | | | ||||||||||
Basic | | | $2.48 | | | | | | | | | | | | | | | | | $1.35 | | | 6(g) | |||||||
Diluted | | | $2.45 | | | | | | | | | | | | | | | | | $1.34 | | | 6(g) | |||||||
| | | | | | | | | | | | | | | | | | | | |||||||||||
Weighted average number of shares outstanding: | | | | | | | | | | | | | | | | | | | | | ||||||||||
Basic | | | 110,750,021 | | | | | | | | | | | | | | | | | 181,603,464 | | | 6(g) | |||||||
Diluted | | | 111,858,095 | | | | | | | | | | | | | | | | | 182,630,411 | | | 6(g) |
| | Historical | | | | | | | | | | | | | | | | | ||||||||||||
| | Ritchie Bros. Auctioneers Incorporated | | | IAA, Inc. | | | | | | | | | | | | | | | | | |||||||||
| | Year ended December 31, 2021 | | | Year ended January 2, 2022 | | | Transaction Accounting Adjustments - Reclassification | | | Notes | | | Transaction Accounting Adjustments - Financing | | | Notes | | | Transaction Accounting Adjustments - Acquisition | | | Notes | | | Pro Forma Combined | | | ||
Revenue: | | | | | | | | | | | | | | | | | | | | | ||||||||||
Service revenue | | | $918 | | | $ 1,537 | | | $ — | | | | | $ — | | | | | $ — | | | | | $2,455 | | | ||||
Inventory sales revenue | | | 499 | | | 300 | | | — | | | | | — | | | | | — | | | | | 799 | | | ||||
Total revenue | | | 1,417 | | | 1,837 | | | — | | | | | — | | | | | — | | | | | 3,254 | | | ||||
| | | | | | | | | | | | | | | | | | | | |||||||||||
Operating expenses: | | | | | | | | | | | | | | | | | | | | | ||||||||||
Cost of services | | | 147 | | | 851 | | | — | | | | | — | | | | | — | | | | | 998 | | | ||||
Cost of inventory sold | | | 448 | | | 261 | | | — | | | | | — | | | | | — | | | | | 709 | | | ||||
Selling, general and administrative expenses | | | 465 | | | 192 | | | (5) | | | 2(f) | | | — | | | | | (12) | | | 6(e) | | | 647 | | | ||
| | | | | | | | | | | | | | 7 | | | 6(f) | | | | | |||||||||
Acquisition-related costs | | | 30 | | | — | | | 5 | | | 2(f) | | | — | | | | | 99 | | | 6(d) | | | 134 | | | ||
Depreciation and amortization expenses | | | 88 | | | 87 | | | — | | | | | — | | | | | (45) | | | 6(a) | | | 382 | | | |||
| | | | | | | | | | | | | | 252 | | | 6(b) | | | | | |||||||||
Foreign exchange loss (gain) | | | 1 | | | — | | | — | | | | | — | | | | | — | | | | | 1 | | | ||||
Total operating expenses, net | | | 1,179 | | | 1,391 | | | — | | | | | — | | | | | 301 | | | | | 2,871 | | | ||||
Gain on disposition of property, plant and equipment | | | 1 | | | — | | | — | | | | | — | | | | | — | | | | | 1 | | | ||||
Operating income | | | 239 | | | 446 | | | — | | | | | — | | | | | (301) | | | | | 384 | | | ||||
| | | | | | | | | | | | | | | | | | | | |||||||||||
Interest expense | | | (37) | | | (58) | | | — | | | | | (249) | | | 4(c) | | | 57 | | | 6(c) | | | (287) | | | ||
Change in fair value of derivatives, net | | | (1) | | | — | | | — | | | | | — | | | | | — | | | | | (1) | | | ||||
Other income (expense), net | | | 3 | | | — | | | — | | | | | — | | | | | — | | | | | 3 | | | ||||
Income before income taxes | | | 204 | | | 388 | | | — | | | | | (249) | | | | | (244) | | | | | 99 | | | ||||
| | | | | | | | | | | | | | | | | | | | |||||||||||
Income tax expense (benefit) | | | 53 | | | 94 | | | — | | | | | (59) | | | 4(d) | | | (59) | | | 4(d) | | | 29 | | | ||
Net income (loss) | | | $151 | | | $294 | | | $— | | | | | $(190) | | | | | $(185) | | | | | 70 | | | ||||
| | | | | | | | | | | | | | | | | | | | |||||||||||
Cumulative dividends on Series A senior preferred shares | | | — | | | — | | | — | | | | | (27) | | | 4(e) | | | — | | | | | (27) | | | |||
Allocated earnings to participating securities | | | — | | | — | | | — | | | | | (7) | | | 4(e) | | | — | | | | | (7) | | | |||
| | | | | | | | | | | | | | | | | | | | |||||||||||
Net income (loss) attributable to: | | | | | | | | | | | | | | | | | | | | | ||||||||||
Common stockholders | | | $151 | | | $294 | | | $— | | | | | $(224) | | | | | $(185) | | | | | $36 | | | ||||
Non-controlling interests | | | — | | | — | | | — | | | | | — | | | | | — | | | | | — | | | ||||
| | | | | | | | | | | | | | | | | | | | |||||||||||
Earnings per share attributable to common stockholders: | | | | | | | | | | | | |||||||||||||||||||
Basic | | | $1.38 | | | | | | | | | | | | | | | | | $0.20 | | | 6(g) | |||||||
Diluted | | | $1.36 | | | | | | | | | | | | | | | | | $0.20 | | | 6(g) | |||||||
| | | | | | | | | | | | | | | | | | | | |||||||||||
Weighted average number of shares outstanding: | | | | | | | | | | | | |||||||||||||||||||
Basic | | | 110,315,782 | | | | | | | | | | | | | | | | | 181,103,317 | | | 6(g) | |||||||
Diluted | | | 111,406,830 | | | | | | | | | | | | | | | | | 182,130,417 | | | 6(g) |
1. | Basis of Presentation |
2. | Significant Accounting Policies |
(a) | Represents the reclassification of inventory assets from other current assets to inventory. |
(b) | Represents the reclassification of income taxes receivable from other current assets to income taxes receivable and the reclassification of income taxes payable from other accrued expenses to income taxes payable. |
(c) | Represents the reclassification of operating lease right-of-use assets from other non-current assets to operating lease right-of-use assets, and the reclassification of operating lease liabilities from trade and other liabilities to short-term right-of-use operating lease liabilities, and other non-current liabilities to long-term right-of-use operating lease liabilities. |
(d) | Represents the reclassification of certain payables to sellers from trade and other liabilities to auction proceeds payable. |
(e) | Represents the reclassification of certain current liabilities from accrued employee benefits and compensation expenses and other accrued expenses to trade and other liabilities. |
(f) | Represents the reclassification of certain acquisition-related costs from selling, general and administrative expenses to acquisition-related costs. |
(g) | Represents the reclassification of foreign exchange losses from other income (expense), net to foreign exchange loss (gain). |
(h) | Represents the reclassification of gain on disposition of property, plant and equipment from other income (expense), net to gain on disposition of property, plant and equipment. |
3. | Calculation of Merger Consideration and Preliminary Purchase Price Allocation of the Mergers |
• | the cancellation and exchange of all 133,769,775 issued and outstanding shares of IAA common stock (including 27,855 shares underlying IAA restricted stock awards), in addition to 59,992 shares underlying IAA phantom stock awards granted to non-employee directors, for $12.80 per share in cash plus an aggregate of 70,287,371 newly issued RBA common shares as calculated based on the exchange ratio; |
• | the cancellation and exchange of all 234,142 granted and outstanding vested and unvested IAA options into RBA options for the purchase of 173,131 RBA common shares with the same terms and vesting conditions except for the number of underlying shares and the exercise price, each of which was adjusted by the estimated equity award exchange ratio; |
• | the cancellation and exchange of all 337,738 granted and outstanding unvested IAA RSU awards into 249,513 RBA RSUs for RBA common shares with the same terms and vesting conditions except for the number of underlying shares, which was adjusted by the estimated equity award exchange ratio; and |
• | the cancellation and exchange of all 312,172 granted and outstanding unvested IAA PRSU awards into 230,641 RBA RSUs for RBA common shares with similar terms except for having time-only vesting conditions and for the underlying number of shares, which was adjusted by the estimated equity award exchange ratio. |
| | (dollars in millions) | |
Estimated cash consideration(1) | | | $1,713 |
Estimated fair value of RBA common shares to be issued(2) | | | 4,229 |
Estimated fair value of assumed IAA equity awards attributable to pre-combination service(3) | | | 21 |
Estimated repayment of certain existing indebtedness of IAA(4) | | | 1,164 |
Total preliminary merger consideration | | | $7,127 |
(1) | Represents the preliminary cash consideration to be paid to IAA stockholders pursuant to the merger agreement based on the capitalization of IAA as of December 31, 2022. |
(2) | Represents the preliminary fair value of RBA common shares to be issued to IAA stockholders pursuant to the merger agreement based on the capitalization of IAA as of December 31, 2022, at a $60.17 closing price per share of RBA common shares as of January 20, 2023. |
(3) | Represents the preliminary portion of the fair value of stock options, restricted stock units and performance-based restricted stock units being cancelled and exchanged by RBA upon completion of the mergers that is attributable to pre-combination service. |
(4) | Represents the total preliminary cash consideration to be paid concurrent with the closing of the mergers to retire certain existing indebtedness of IAA with an outstanding balance of approximately $1,164.3 million as of October 2, 2022, including accrued interest and prepayment penalties. |
| | Stock Price | | | Estimated Merger Consideration | | | Estimated Goodwill | |
Change in Stock Price | | | (dollars in millions, except stock price) | ||||||
Increase of 10% | | | $66.19 | | | $7,552 | | | $4,956 |
Decrease of 10% | | | $54.15 | | | $6,703 | | | $4,107 |
| | (dollars in millions) | |
Estimated cash consideration | | | $1,713 |
Estimated fair value of RBA common shares to be issued | | | 4,229 |
Estimated fair value of assumed IAA equity awards attributable to pre-combination service | | | 21 |
Estimated repayment of certain existing indebtedness of IAA | | | 1,164 |
Total estimated merger consideration | | | $7,127 |
| | ||
Cash and cash equivalents | | | $90 |
Trade and other receivables | | | 418 |
Inventory | | | 48 |
Income taxes receivable | | | 4 |
Other current assets | | | 26 |
Property, plant and equipment | | | 618 |
Operating lease right-of-use assets | | | 1,149 |
Other non-current assets | | | 30 |
Intangible assets | | | 2,340 |
Total assets | | | $4,723 |
| | ||
Auction proceeds payable | | | $7 |
Trade and other liabilities | | | 298 |
Short-term right-of-use operating lease liability | | | 152 |
Income taxes payable | | | 2 |
Long-term right-of-use operating lease liability | | | 997 |
Other non-current liabilities | | | 23 |
Deferred tax liabilities | | | 648 |
Total liabilities | | | $2,127 |
| | ||
Preliminary fair value of net assets acquired | | | $2,596 |
Preliminary allocation of goodwill | | | $4,531 |
Historical goodwill of IAA | | | $749 |
Adjustment to goodwill | | | $3,782 |
4. | Transaction Accounting Adjustments – Financing |
(a) | Reflects the newly raised term loan A facility, including the refinancing of RBA's existing delayed-draw term loan, and the bridge loan facility with a total principal amount of $2,796.1 million to fund the mergers as described in the other financing events section above, net of a total $27.1 million deferred financing costs. |
| | (dollars in millions) | |
Term loan A facility | | | $1,910 |
Estimated deferred financing costs | | | (18) |
Net proceeds | | | 1,892 |
Current portion of long-term debt | | | (96) |
Long-term debt | | | $1,796 |
| | ||
Bridge loan facility | | | $886 |
Estimated deferred financing costs | | | (9) |
Net proceeds | | | 877 |
Current portion of long-term debt | | | (877) |
Long-term debt | | | $ — |
| | (dollars in millions) | |
Current portion of long-term debt repayment | | | $ (4) |
Long-term debt repayment | | | (81) |
Delayed-draw term loan repayment | | | $(85) |
(b) | Represents the gross proceeds from the Starboard investment in aggregated amount of $500.0 million in connection with the sale and issuance of (i) 485,000,000 of RBA Series A senior preferred shares at a purchase price of $1.00 per share, and (ii) 251,163 shares of RBA common shares at a purchase price of $59.722 per share, pursuant to the securities purchase agreement. |
(c) | Represents the total interest expense and amortization of deferred issuance costs for the term loan A facility and the bridge loan facility to be incurred by RBA to fund the mergers as described in the other financing events section above, and the elimination of historical interest expense in connection with the delayed-draw term loan refinancing. Interest expense is calculated using an effective interest rate method. The effective interest rate for the term loan A facility and the bridge loan facility was 7.7% and 12.0%, respectively. |
(d) | Represents the tax expense (benefit) impact at an estimated blended effective tax rate of 24.31% and 24.00% for the nine months ended September 30, 2022 and the year ended December 31, 2021, respectively, based on the weighted-average statutory tax rate of the jurisdictions expected to be impacted |
(e) | Represents the estimated cumulative preferred share dividend associated with the Series A senior preferred shares to be sold and issued in connection with the Starboard investment. |
5. | Transaction Accounting Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet |
(a) | Represents the settlement by IAA immediately prior to the closing of the estimated transaction costs to be incurred by IAA in connection with the mergers. |
(b) | Represents the adjustments to historical IAA balances to reflect the impact of acquisition accounting as outlined in Note 3 above, based on the total preliminary merger consideration of $7,127.2 million, which consists of (i) cash consideration of $1,712.9 million to be paid to IAA stockholders, (ii) issuance of 70,287,371 RBA common shares with an estimated fair value of $4,228.9 million, (iii) issuance of approximately RBA equity awards covering 653,285 RBA common shares with an estimated fair value of $21.1 million attributable to IAA equity award holders’ pre-combination service, and (iv) repayment of certain existing indebtedness of IAA outstanding as of October 2, 2022 of approximately $1,164.3 million, including accrued interest and prepayment penalties under IAA’s credit facilities and senior notes, as summarized below: |
| | (dollars in millions) | |
Total merger consideration | | | $7,127 |
Less: identifiable net assets acquired(1) | | | (2,596) |
Estimated goodwill | | | $4,531 |
| | ||
IAA historical goodwill | | | 749 |
Adjustment to goodwill | | | $3,782 |
| | ||
Historical RBA goodwill | | | 947 |
Pro forma goodwill | | | $5,478 |
(1) | The purchase price allocation is based on preliminary estimates of fair value of assets acquired and liabilities assumed. The difference between the estimated total merger consideration and preliminary identifiable net assets acquired is recorded as estimated goodwill. The preliminary purchase price and purchase price allocation are presented in Note 3 above. Upon completion of the fair value assessment after the mergers, it is anticipated that the ultimate purchase price allocation will differ from the preliminary assessment outlined here. Any changes to the initial estimates of the fair value of the acquired assets and assumed liabilities will be recorded as adjustments to those assets and liabilities, and residual amounts will be allocated to goodwill. Final consideration will be determined at the closing of the mergers. |
| | (dollars in millions) | |
Elimination of IAA historical additional paid-in capital | | | $(22) |
Estimated fair value of RBA common shares to be issued | | | 4,229 |
Estimated fair value of assumed IAA equity awards attributable to pre-combination service | | | 21 |
Additional paid-in capital | | | $4,228 |
(c) | Represents the settlement of the estimated transaction costs to be incurred by RBA in connection with the mergers. |
(d) | Represents the one-time special dividend expected to be approved and declared in connection with the closing of the mergers in an estimated aggregated amount of $120.0 million. The special dividend is expected to be payable in cash to holders of record of RBA common shares as of a pre-closing record date. |
6. | Transaction Accounting Adjustments to Unaudited Pro Forma Condensed Combined Income Statement |
(a) | Represents the elimination of IAA historical amortization expense relate to identifiable intangible assets. |
(b) | Represents the recognition of new amortization expense related to acquired identifiable assets based on the estimated fair value as of January 20, 2023. Amortization expense is calculated based on the estimated fair value of each of the identifiable intangible assets and the associated estimated useful lives below: |
| | Estimated Value | | | Potential Useful Life | |
Assets acquired | | | (dollars in millions) | | | (years) |
Provider and buyer relationships | | | $2,030 | | | 10 |
Developed technology | | | 150 | | | 6 |
Trade names and trademarks | | | 160 | | | 6 |
Total assets acquired | | | $2,340 | | |
(c) | Represents the elimination of the interest expense associated with IAA’s extinguished credit facilities and senior notes. |
(d) | Represents the one-time direct and incremental transaction costs anticipated to be incurred by RBA prior to, or concurrent with, the mergers and are reflected in the unaudited pro forma condensed combined balance sheet as a direct reduction to the combined entity’s accumulated deficit and are assumed to be cash settled. |
(e) | Represents the elimination of historical IAA stock-based compensation expense related to IAA equity awards. |
(f) | Represents the recognition of new stock-based compensation expense for the post-combination portion of the cancelled and exchanged IAA equity awards. |
(g) | Represents the pro forma basic and diluted net income per share attributable to the combined entity’s common shareholders presented in conformity with the two-class method required for participating securities as a result of the pro forma adjustments. The two-class method requires income available to common shareholders for the period to be allocated between shares of common stock and participating securities based on their respective rights to receive earnings as if all earnings for the period had been distributed. The Series A senior preferred shares of the combined entity are participating securities that contractually entitle the holders of such shares to participate in the combined entity’s earnings but do not contractually require the holders of such shares to participate in the combined entity’s losses. |
| | For the nine months ended September 30, 2022 | | | For the year ended December 31, 2021 | |
| | (dollars in millions, except share and per share data) | ||||
Numerator: | | | | | ||
Net income (loss) | | | $274 | | | $70 |
Cumulative dividend related to the issuance of Series A senior preferred shares | | | (20) | | | (27) |
Allocated earnings to participating securities | | | (9) | | | (7) |
Pro forma net income attributable to common stockholders | | | $245 | | | $36 |
| | | | |||
Denominator: | | | | | ||
Historical RBA weighted average shares outstanding (basic) | | | 110,750,021 | | | 110,315,782 |
RBA common shares to be issued to IAA stockholders pursuant to the merger agreement(1) | | | 70,287,371 | | | 70,287,371 |
RBA common shares to be issued to holders of assumed IAA equity awards subject to post-closing vesting(2) | | | 314,909 | | | 249,001 |
Common shares issued in connection with the Starboard investment | | | 251,163 | | | 251,163 |
Pro forma weighted average shares (basic) | | | 181,603,464 | | | 181,103,317 |
| | | |
| | For the nine months ended September 30, 2022 | | | For the year ended December 31, 2021 | |
| | (dollars in millions, except share and per share data) | ||||
Historical RBA weighted average shares outstanding (diluted) | | | 111,858,095 | | | 111,406,830 |
RBA common shares to be issued to IAA stockholders pursuant to the merger agreement(1) | | | 70,287,371 | | | 70,287,371 |
RBA common shares to be issued to holders of assumed IAA equity awards subject to post-closing vesting(2) | | | 484,945 | | | 436,216 |
Pro forma weighted average shares (diluted) | | | 182,630,411 | | | 182,130,417 |
| | | | |||
Pro forma net income per share attributable to common shares: | | | | | ||
Basic | | | $1.35 | | | $0.20 |
Diluted | | | $1.34 | | | $0.20 |
(1) | Includes the cancellation and exchange of all 133,769,775 issued and outstanding shares of IAA common stock (including 27,855 shares underlying IAA restricted stock awards), in addition to 59,992 shares underlying IAA phantom stock awards granted to non-employee directors, based on the capitalization activity of IAA as of December 31, 2022, into $12.80 per share in cash, plus an aggregate of 70,287,371 RBA common shares. |
(2) | A total of 337,738 granted and outstanding unvested IAA RSU awards and 312,172 shares granted and outstanding of unvested IAA PRSU awards are cancelled and converted into 480,154 shares of RBA RSU awards. The number of such RBA RSU awards vested during the first 12 months and 18 months after the mergers are added to the historical basic RBA common shares outstanding. The weighted average impact to the number of shares added to the historical basic RBA common shares is not material. |
7. | Non-GAAP Measures |
• | the non-GAAP financial information within Management’s Discussion and Analysis of Financial Condition and Results of Operations of RBA as of and for the year ended December 31, 2021, included in RBA’s Annual Report on Form 10-K filed with the SEC on February 17, 2022; |
• | the non-GAAP financial information within Management’s Discussion and Analysis of Financial Condition and Results of Operations of RBA as of and for the nine months ended September 30, 2022, included in RBA’s Quarterly Report on Form 10-Q filed with the SEC on November 7, 2022; |
• | the non-GAAP financial information within Exhibit 99.1 of IAA as of and for the year ended January 2, 2022, included in IAA’s Current Report (excluding any information and exhibits furnished under Item 2.02 or 7.01) on Form 8-K filed with the SEC on February 11, 2022; and |
• | the non-GAAP financial information within Exhibit 99.1 of IAA as of and for the nine months ended October 2, 2022, included IAA’s Current Report (excluding any information and exhibits furnished under Item 2.02 or 7.01) on Form 8-K filed with the SEC on November 7, 2022. |
• | do not reflect interest income, interest expense or other non-operating gains and losses, which may represent an increase to or reduction in cash available to us; |
• | exclude non-cash charges for depreciation of property, plant and equipment and amortization of intangible assets, and although the assets being depreciated and amortized may have to be replaced in the future, pro forma adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; |
• | do not reflect acquisition costs, restructuring costs, litigation costs or other costs that we do not consider to be routine in nature for the ongoing financial performance of our business, which may represent a reduction in cash available to us; |
• | exclude non-cash charges for stock-based compensation expense, which is expected to continue to be part of our compensation strategy; |
• | do not reflect provisions for income taxes, which may represent a reduction in cash available to us. |
| | For the nine months ended September 30, 2022 | | | For the year ended December 31, 2021 | |
| | (dollars in millions) | ||||
Pro forma net income | | | $274 | | | $70 |
Add: depreciation and amortization | | | 294 | | | 382 |
Add: interest expense | | | 230 | | | 287 |
Less: interest income(1) | | | (4) | | | (2) |
Add: income tax expense | | | 59 | | | 29 |
Pro forma EBITDA | | | $853 | | | $ 766 |
Share-based payment expense(2) | | | 31 | | | 30 |
Acquisition-related costs | | | 15 | | | 134 |
Non-recurring advisory, legal and restructuring costs(3) | | | 7 | | | 7 |
Loss (gain) on disposition of property, plant and equipment and related costs(4) | | | (168) | | | (2) |
Change in fair value of derivatives | | | (1) | | | 1 |
Fair value adjustments related to contingent consideration(5) | | | 5 | | | 2 |
Adjusted pro forma EBITDA | | | $742 | | | $ 938 |
(1) | Includes $0.5 million and $0.4 million of interest income for IAA for the nine months ended October 2, 2022 and the year ended January 2, 2022, respectively. |
(2) | Includes $3.0 million and $7.0 million of pro forma IAA share-based payment expenses for the nine months ended October 2, 2022 and the year ended January 2, 2022, respectively. |
(3) | Includes $2.3 million and $3.3 million of non-recurring IAA retention/severance costs and professional fees costs for the nine months ended October 2, 2022 and the year ended January 2, 2022, respectively. |
(4) | Includes $(0.7) million and $(0.1) million of IAA costs related to loss (gain) on disposition of property, plant and equipment for the nine months ended October 2, 2022 and the year ended January 2, 2022. |
(5) | Adjustment specific to IAA only activities for respective periods. |
| | For the nine months ended September 30, 2022 | | | For the year ended December 31, 2021 | |
| | (dollars in millions) | ||||
Pro forma net income attributable to common stockholders | | | $245 | | | $36 |
Share-based payment expense | | | 31 | | | 30 |
Acquisition-related costs | | | 15 | | | 134 |
Amortization of acquired intangible assets(1) | | | 214 | | | 280 |
Non-recurring advisory, legal and restructuring costs | | | 7 | | | 7 |
Loss (Gain) on disposition on property, plant and equipment and related costs | | | (168) | | | (2) |
Loss on redemption and extinguishment of indebtedness and related interest expenses(2) | | | 10 | | | 10 |
Change in fair value of derivatives | | | (1) | | | 1 |
Fair value adjustments related to contingent consideration | | | 5 | | | 2 |
Related tax effects of the above | | | (41) | | | (113) |
Related allocation of the above to participating securities | | | (3) | | | (7) |
Adjusted pro forma net income attributable to common stockholders | | | $314 | | | $378 |
(1) | Includes the recognition of new amortization expense related to identifiable acquired assets based on the estimated fair values as of January 20, 2023. |
(2) | Includes IAA’s loss of extinguishment of debt of $10.3 million for the year ended January 2, 2022. |
Name | | | IAA Stock Options (#)(1) | | | Value ($) | | | IAA RSU Awards (#)(2) | | | Value ($) | | | IAA PRSU Awards (#)(3) | | | Value ($) | | | IAA Restricted Stock Awards (#)(4) | | | Value ($) | | | IAA Phantom Stock Awards (#)(5) | | | Value ($) |
Directors | | | | | | | | | | | | | | | | | | | | | ||||||||||
John P. Larson | | | — | | | — | | | — | | | — | | | — | | | — | | | 10,575 | | | $405,657 | | | 17,801 | | | $682,846 |
Brian Bales | | | — | | | — | | | — | | | — | | | — | | | — | | | 2,768 | | | $106,180 | | | 9,150 | | | $350,994 |
William Breslin | | | — | | | — | | | — | | | — | | | — | | | — | | | 12,942 | | | $496,455 | | | — | | | — |
Sue Gove | | | — | | | — | | | — | | | — | | | — | | | — | | | 11,918 | | | $457,174 | | | — | | | — |
Lynn Jolliffe | | | — | | | — | | | — | | | — | | | — | | | — | | | 19,517 | | | $748,672 | | | 8,859 | | | $339,831 |
Peter H. Kamin | | | — | | | — | | | — | | | — | | | — | | | — | | | 11,918 | | | $457,174 | | | — | | | — |
Olaf Kastner | | | — | | | — | | | — | | | — | | | — | | | — | | | 9,662 | | | $370,634 | | | — | | | — |
Michael Sieger | | | — | | | — | | | — | | | — | | | — | | | — | | | 3,714 | | | $142,469 | | | — | | | — |
| | | | | | | | | | | | | | | | | | | | |||||||||||
Executive Officers | | | | | | | | | | | | | | | | | | | | | ||||||||||
John W. Kett | | | 41,914 | | | — | | | 55,978 | | | $2,147,316 | | | 131,590 | | | $5,047,792 | | | — | | | — | | | — | | | — |
Name | | | IAA Stock Options (#)(1) | | | Value ($) | | | IAA RSU Awards (#)(2) | | | Value ($) | | | IAA PRSU Awards (#)(3) | | | Value ($) | | | IAA Restricted Stock Awards (#)(4) | | | Value ($) | | | IAA Phantom Stock Awards (#)(5) | | | Value ($) |
Susan Healy | | | — | | | — | | | 16,558 | | | $635,165 | | | 12,516 | | | $480,114 | | | — | | | — | | | — | | | — |
Tim O’Day | | | 33,811 | | | — | | | 21,647 | | | $830,379 | | | 28,930 | | | $1,109,755 | | | — | | | — | | | — | | | — |
Sidney Peryar | | | 20,917 | | | — | | | 12,126 | | | $465,153 | | | 16,341 | | | $626,841 | | | — | | | — | | | — | | | — |
Maju Abraham | | | 15,979 | | | — | | | 9,244 | | | $354,600 | | | 12,199 | | | $467,954 | | | — | | | — | | | — | | | — |
(1) | Each IAA option included is fully vested. |
(2) | Each IAA RSU award included is unvested. |
(3) | Each IAA PRSU award included is unvested. As described further below under the section entitled “The Merger Agreement—Treatment of Equity Awards”, each unvested and outstanding IAA PRSU award is being assumed and converted into an RBA award based on the target number of IAA shares of common stock subject to such IAA PRSU award immediately prior to closing of the first merger. Accordingly, the number of shares included for each applicable executive officer represents the target number of shares underlying each IAA PRSU award held by such executive officer as of January 25, 2023. |
(4) | Each IAA restricted stock award is unvested. |
(5) | Each IAA phantom stock award held by each director is fully vested with the exception of unvested IAA phantom stock awards covering 3,714 shares of IAA common stock held by Brian Bales. |
Golden Parachute Compensation(1) | | ||||||||||||||
Named Executive Officer(2) | | | Cash ($)(3) | | | Equity ($)(4) | | | Perquisites Benefits ($)(5) | | | Other ($)(6) | | | Total ($) |
John W. Kett | | | $5,024,178 | | | $7,195,108 | | | $44,323 | | | — | | | $12,263,609 |
Susan Healy | | | $2,257,449 | | | $1,115,279 | | | $14,483 | | | $250,000 | | | $3,637,211 |
Tim O’Day | | | $2,368,108 | | | $1,940,134 | | | $44,323 | | | $175,000 | | | $4,527,565 |
Sidney Peryar | | | $1,792,894 | | | $1,091,994 | | | $14,774 | | | $250,000 | | | $3,149,662 |
Maju Abraham | | | $869,235 | | | $822,554 | | | $24,607 | | | $100,000 | | | $1,816,396 |
Vance Johnston | | | — | | | — | | | — | | | — | | | — |
(1) | The conditions under which each of these payments and benefits are to be provided are further described above in this section entitled “—Interests of IAA Directors and Executive Officers in the Mergers.” and in the footnotes below. Under each named executive officer’s IAA employment agreement, if payments or benefits payable to the named executive officer would be subject to the excise tax imposed by Section 4999 of the Code, such amounts will be reduced to the extent necessary to avoid such excise tax, unless the named executive officer would be better off, on an after tax basis, receiving a larger portion, up to and including full payment, of such amounts. The effect of this provision and any related cut backs are not reflected in the values disclosed in this table. |
(2) | Under relevant SEC rules, IAA is required to provide information in this table with respect to its “named executive officers,” who are generally the individuals whose compensation was required to be reported in the summary compensation table of IAA’s most recent proxy statement. While disclosure is, therefore, required with respect to Vance Johnston, IAA’s former Chief Financial Officer, he terminated employment with IAA on September 1, 2021 and will not receive any compensation that is based on or otherwise relates to the mergers. |
(3) | The amounts in this column represent the “double-trigger” cash severance payments that each applicable named executive officer may become entitled to receive under his or her IAA employment agreement, as described in more detail in this section entitled “—Severance Entitlements.” The table below sets forth the breakdown of these payments. Value changes as compared to the joint proxy statement/prospectus filed on December 14, 2022 reflect the correction of certain calculation and typographical errors and are not the result of any changes to, or amendments of, the cash severance payments that the applicable named executive officer may become entitled to under his or her IAA executive agreement. |
Name | | | Severance Payment- Change in Control Severance Multiple Times Sum of Salary plus Target Bonus ($) | | | Severance Payment- Pro-Rata Bonus ($) | | | Total Value ($) |
John W. Kett | | | $4,961,250 | | | $62,928 | | | $5,024,178 |
Susan Healy | | | $2,231,250 | | | $26,199 | | | $2,257,449 |
Tim O’Day | | | $2,340,625 | | | $27,483 | | | $2,368,108 |
Sidney Peryar | | | $1,773,750 | | | $19,144 | | | $1,792,894 |
Maju Abraham | | | $853,875 | | | $15,360 | | | $869,235 |
Vance Johnston | | | — | | | — | | | — |
(4) | The amounts in this column represent the “double-trigger” vesting acceleration benefits that each applicable named executive officer may become entitled to receive under the IAA equity plan, as described in more detail in this section entitled “—Equity and Equity Based Awards.” The breakdown of the vesting acceleration value by award type is set forth in the table below. |
Name | | | Value of Unvested IAA RSU Awards ($) | | | Value of Unvested IAA PRSU Awards ($) |
John W. Kett | | | $2,147,316 | | | $5,047,792 |
Susan Healy | | | $635,165 | | | $480,114 |
Tim O’Day | | | $830,379 | | | $1,109,755 |
Sidney Peryar | | | $465,153 | | | $626,841 |
Maju Abraham | | | $354,600 | | | $467,954 |
Vance Johnston | | | — | | | — |
(5) | The amounts in this column represent the “double-trigger” COBRA reimbursement benefit that each applicable named executive officer may become entitled to receive under his or her IAA employment agreement. |
(6) | The amounts in this column represent the “single-trigger” transaction bonus that each applicable named executive officer may become entitled to receive, as described further above in the section entitled “—Transaction Bonuses.” |
RBA Director Designee | | | |
Age: 49 | | | |
| |
• | Extensive experience as an active change agent investor. |
• | Worked with more than 50 different public companies to improve operations, strategy and corporate governance for the benefit of stockholders. |
• | Managing Member, Chief Executive Officer and Chief Investment Officer of Starboard Value LP, a New York-based investment adviser with a focused and fundamental approach to investing primarily in publicly traded U.S. companies, which he founded in April 2011, with a spin-off of the existing Value and Opportunity Fund. |
• | Chair of the board of directors of Papa John’s International, Inc. (Nasdaq: PZZA). |
• | Member of the board of directors of Cyxtera Technologies, Inc. (Nasdaq: CYXT). |
• | From January 1998 to April 2011, at Ramius LLC, a subsidiary of the Cowen Group, Inc., where he was a Partner and Managing Director and the Chief Investment Officer of the funds that comprised the Value and Opportunity investment platform. |
• | Prior to joining Ramius LLC in January 1998, served as Vice President of Strategic Development and a director of The Fresh Juice Company, Inc. |
• | Began his career in the Mergers and Acquisitions department at Société Générale. |
IAA Independent Director | | | Current IAA Board Committees: |
since June 2019 | | | Risk & Sustainability Committee (Chair) |
Age: 59 | | | Audit Committee |
| | Transaction Committee |
• | Significant management experience, including as a leader at a Fortune 300 company with extensive experience in business strategy, transformational growth including mergers, acquisitions & divestitures, risk management & oversight, commercial real estate & infrastructure development, capital markets, capital allocation and investor relations, enables him to provide the RBA board with additional perspectives on RBA’s operations. |
• | Extensive leadership oversight of environmental and sustainability initiatives, including the development and measurement of goals designed to benefit the environment and society while enhancing the foundation and profitability of a business for the long-term. |
• | Executive Vice President, Chief Development Officer, at Republic Services, Inc., a leader in the U.S. environmental services industry, since 2015. |
• | Executive Vice President, Business Development at Republic Services, Inc. from 2008 to 2015, and Vice President, Corporate Development, from 1998 to 2008. |
• | Held roles of increasing responsibility in finance and business development for Ryder System, Inc. from 1993 to 1998. |
• | Chief Financial Officer for EDIFEX & VTA Communications from 1988 to 1993. |
• | Began his professional career as an accountant with Price Waterhouse, now PricewaterhouseCoopers, from 1986 to 1988. |
• | Graduate of the University of Tennessee (BS, Business Administration) and Certified Public Accountant. |
IAA Independent Director | | | Current IAA Board Committees: |
since June 2019 | | | Compensation Committee |
Age: 73 | | | Nominating & Corporate Governance Committee |
• | Senior executive leadership and board of directors experience enables him to offer the RBA board a seasoned corporate governance perspective. |
• | Significant experience in consulting, claims management, and loss management solutions across the insurance and automotive industries. |
• | Advisor of Buckle TPAs which provides claim services for Gateway Insurance Company from 2020-2022. |
• | Founder and CEO of Wenonah Consulting, which specializes in delivering service, expense and loss management solutions to claims operations across the insurance industry, since 2009. |
• | President of Vericlaim Repair Solutions, a managed repair network of certified local, regional and national contractors, from 2011 to 2017. |
• | Executive Vice President and Chief Operating Officer at TriServ Alliance, a claims management organization established by seven Blue Cross Blue Shield companies to service 2.9 million customers in nine states, from 2008 to 2009. |
• | Led the claims function as Senior Vice President of Claims for USAA from 1999 to 2008; for GE Financial Assurance from 1996 to 1999; and for Prudential Insurance from 1974 to 1996. |
• | Member of the Board of Directors of Insight Services Group, which provides fraud investigations and Independent Medical evaluations for the industry, since 2014. |
• | Board member of West Hill Global, Inc., which is a property management repair business, from 2018 to 2020. |
• | Board member of Summit TopCo GP, LLC Classic Collision, which provides automobile repair services, since March 2020. |
• | Board member of ABRA Auto Body and Glass, a network of auto body repair facilities for the industry, from 2011 to 2019. |
• | Board member of Pronto Insurance from 2014 to 2018. |
• | Board member of Enservio, Inc, a contents replacement company for homeowner claims, from 2010 to 2016. |
• | EVP at Triserv Alliance, building a company to provide health care for the military and their families in the southern region, from 2008 to 2009. |
• | Graduate of Southern Benedictine College (BA, Education). |
IAA Chief Executive Officer | | | Current IAA Board Committees: |
director since June 2019 | | | Operations Committee |
Age: 59 | | | Transaction Committee |
• | Significant knowledge and understanding of IAA’s data, services, operations and business environment. |
• | Extensive business, management and operational experience as senior executive and CEO in the automotive, insurance claims, technology and services industries, which provides him with perspective into RBA’s challenges, operations, and strategic opportunities. |
• | Chief Executive Officer of IAA since May 2014. |
- | Served a variety of executive roles in his nearly 20 years with IAA, helping IAA become an independent public company in 2019. |
- | In 2021, IAA generated $1.83 billion in revenue. |
- | Served as Senior Vice President of Planning and Business Development, CFO and President between 2001 and 2014. |
• | On the national board of directors for SkillsUSA since 2017. |
• | On the Executive Advisory Council to the Northern Illinois University College of Business. |
• | On the Ravinia Board of Trustees, as well its DEI subcommittee. |
• | An active member of the Economic Club of Chicago, Alliance of Chief Executives, and in 2020 became a Trustee of the Committee for Economic Development (CED). |
• | Held senior financial roles at Central Steel and Wire Co., Safelite Glass Corporation, Newark Electronics and Deloitte LLP between 1985 and 2001. |
• | Graduate of Northern Illinois University and Northwestern University (MBA). |
IAA Independent Director | | | Current IAA Board Committees: |
since June 2022 | | | Nominating & Corporate Governance Committee |
Age: 61 | | |
• | RBA’s board Extensive experience and leadership in the automotive insurance industry from over three decades with The Progressive Corporation (NYSE: PGR) enables him to provide significant insight and be a valuable resource to RBA’s board with respect to the risks and opportunities facing RBA’s business. |
• | Possesses strong public company executive management experience, as well as significant strategic planning experience. |
• | Claims President with Progressive from 2015 until his retirement in January 2022. |
• | Served in various other positions at Progressive from 1990 to 2015: |
- | General Manager Claims Process from 2007 to 2015. |
- | General Manager Northeast Field Claims from 1999 to 2007. |
- | General Manager WA and PA from 1996 to 1999. |
- | Product Manager MS from 1992 to 1996. |
- | Product Manager Corporate Marketing from 1990 to 1992. |
• | Consultant at Frank Lynn & Associates from 1989 to 1990. |
• | Serves on the board of directors of nonprofits Bellefaire JCB and the Jewish Federation of Cleveland. |
• | Graduate of the University of Chicago Graduate School of Business (MBA) and Case Western Reserve University (BS, Electrical Engineering). |
Current IAA Board Committees: | |||
None | | | |
Age: 64 | | |
• | Senior executive leadership and board of directors experience, coupled with accounting expertise, enables him to offer the RBA board a seasoned corporate governance perspective. |
• | Significant experience in collision repair and glass repair across the automotive industry. |
• | President and CEO of Boyd Group Services Inc. (TSX: BYD) (“Boyd”), one of the largest automotive collision repair, glass repair and glass replacement companies in North America, since 2020. |
- | Board member of Boyd, since 2019, and board member of Boyd’s predecessor, Boyd Group Income Fund, from 2012 to 2019. |
- | President & COO of Boyd and Boyd Group Income Fund, from 2017 to 2019. |
- | Chief Operating Officer of Boyd Group US Inc., a subsidiary of Boyd, from 2004 to 2016. |
• | VP of Operations at Gerber Collision & Glass Inc., an automobile collision repair company, from 1998 to 2004. |
• | Western Division Vice President at Midas International, LLC, a chain of automotive service centers, from 1992 to 1998. |
• | Board member of I-CAR, a nonprofit organization established to deliver increasingly accessible, on-demand and relevant education, knowledge, services and solutions for the Collision Repair Inter-Industry, from 2013 to 2022. |
• | Board member of the Collision Repair Education Foundation, a nonprofit organization dedicated to supporting collision repair educational programs, schools, and students to create qualified, entry-level employees and connect them with an array of career opportunities, from 2010 to 2016. |
• | Graduate of Michigan State University (B.S., Accounting). |
• | the current rights of IAA stockholders under the DGCL and IAA’s certificate of incorporation and bylaws, each as amended to the date hereof, and |
• | the current rights of RBA shareholders under the CBCA and RBA articles of incorporation and bylaw, each as amended to the date hereof. |
RBA | | | IAA |
Authorized and Outstanding Capital | |||
| | ||
RBA’s authorized share capital consists of an unlimited number of RBA common shares, an unlimited number of RBA senior preferred shares, and an unlimited number of RBA junior preferred shares. At the close of business on the RBA record date, there were 110,887,811 RBA common shares issued and outstanding and no RBA senior preferred shares or RBA junior preferred shares outstanding. On February 1, 2023, RBA issued 485,000,000 RBA Series A senior preferred shares and 251,163 RBA common shares pursuant to the terms of the securities purchase agreement described above in the section entitled “Recent Developments — Securities Purchase Agreement.” | | | IAA is authorized to issue 900,000,000 shares of stock, consisting of 750,000,000 shares of IAA common stock, and 150,000,000 shares of IAA preferred stock. At the close of business on the IAA record date, there were 133,769,775 shares of IAA common stock issued and outstanding and no shares of preferred stock issued and outstanding. |
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Rights of Preferred Shares | |||
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RBA is authorized to issue RBA senior preferred shares and RBA junior preferred shares, each in one or more series. The RBA board may provide, by resolution or resolutions duly adopted by it prior to issuance, for the creation of each such series and to fix the designation and the powers, preferences, rights, qualifications, limitations and restrictions relating to the shares of each such series. The RBA board, through the articles of amendment, has designed a series of RBA senior preferred shares as the RBA preferred shares. See the section entitled “Description of RBA’s Share Capital” for a summary of the rights of RBA Series A senior preferred shares. Holders of RBA senior preferred shares and RBA junior preferred shares are also entitled to all of the applicable rights and obligations provided under the CBCA, RBA’s articles (including the articles of amendment) and RBA’s by-laws, as applicable. | | | The IAA board is authorized to provide for the issuance of all or any of the shares of the IAA preferred stock in one or more classes or series, and to fix for each such class or series such voting powers, full or limited, or no voting powers, and such distinctive designations, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as stated and expressed in a resolution or resolutions adopted by the IAA board providing for the issuance of such class or series and as may be permitted by the DGCL. The number of authorized shares of IAA preferred stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority in voting power of the stock of IAA entitled to vote thereon irrespective of the provisions of Section 242(b)(2) of the DGCL (or any successor provision thereto), and no vote of the holders of any of the IAA common stock or IAA preferred stock voting separately as a class shall be required therefor. |
RBA | | | IAA |
Voting Rights | |||
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The CBCA provides that, in general, the holders of at least one class of shares of a corporation are entitled to receive notice of and vote at each meeting of shareholders. Holders of RBA common shares are entitled to one vote for each share held on all matters on which RBA common shareholders are entitled to vote. See the section entitled “Description of RBA’s Share Capital” for a summary of the voting rights of RBA Series A senior preferred shares. | | | Each holder of record of shares of IAA common stock is entitled to one vote for each share of IAA common stock held on all matters submitted to a vote of IAA stockholders on which holders of IAA common stock are entitled to vote. |
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Dividends | |||
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Under the CBCA, a corporation may pay a dividend by issuing fully paid shares of such corporation or may pay in money or property. If shares of a corporation are issued in payment of a dividend, the declared amount of the dividend stated as an amount of money will be added to the stated capital account maintained or to be maintained for the shares of the class or series issued in payment of the dividend. RBA currently pays a quarterly cash dividend of US $0.27 per RBA common share. RBA currently intends to continue to declare and pay a quarterly dividend in this amount on RBA common shares. However, any decision to declare and pay dividends in the future will be made at the discretion of RBA board, after taking into account RBA’s operating results, financial condition, cash requirements, financing agreement restrictions and other factors the RBA board may deem relevant. See the section entitled “Description of RBA’s Share Capital” for a summary of the dividend rights of RBA Series A senior preferred shares. | | | Subject to the rights of the holders of IAA preferred stock, and subject to any other provisions of the IAA certificate of incorporation, as it may be amended from time to time, holders of shares of IAA common stock are entitled to receive such dividends and other distributions in cash, stock or property of IAA if, as and when declared thereon by the IAA board from time to time out of assets or funds of IAA legally available therefor. |
Quorum | |||
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Under RBA’s bylaws, a quorum at an RBA shareholder meeting requires the presence of at least two persons present in person, each being an RBA shareholder or duly appointed proxyholder of an RBA shareholder, together holding at least 33% of the total issued and outstanding RBA common shares entitled to vote at the meeting. Abstentions will count as votes present and entitled to vote for the purpose of determining the presence of a quorum for the transaction of business at an RBA shareholder meeting. If a quorum is not present, the meeting may be adjourned or postponed, in the manner provided in RBA’s bylaws, until the holders of the number of RBA common shares required to constitute a quorum attend. | | | The IAA bylaws provide that unless otherwise required by applicable law or the IAA certificate of incorporation, the holders of a majority of IAA’s capital stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of IAA stockholders for the transaction of business. A quorum, once established, shall not be broken by the withdrawal of enough votes to leave less than a quorum. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, in the manner provided in the IAA bylaws, until a quorum shall be present or represented. |
RBA | | | IAA |
Number of Directors | |||
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The CBCA provides that the board of directors of a distributing corporation will consist of not fewer than three directors, at least two of whom are not officers or employees of the corporation or its affiliates. RBA is a distributing corporation under the CBCA and RBA’s articles of amalgamation provide that the number of directors will be not less than three or more than 12. The exact number of directors within these limits will be fixed from time to time by resolution of the board of directors. The RBA board currently consists of nine (9) directors. | | | The IAA certificate of incorporation provides that the IAA board shall consist of not less than two or more than fifteen members, the exact number of which shall be fixed from time to time by resolution adopted by the affirmative vote of a majority of the entire IAA board. There are currently nine IAA directors. The IAA certificate of incorporation provides that, until IAA’s annual meeting of stockholders in 2023, the IAA board is classified into three classes pursuant to Section 141(d) of the DGCL. |
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Election of Directors | |||
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The CBCA provides that directors will be elected by ordinary resolution passed at a meeting of the shareholders called for that purpose. | | | The IAA bylaws provide that each director shall be elected by the vote of a majority of votes cast with respect to that director’s election at any meeting for the election of directors at which a quorum is present, provided that if, as of the 10th day preceding the date IAA first provides notice of such meeting in accordance with the IAA bylaws, the number of nominees exceeds the number of directors to be elected (a “contested election”), the directors shall be elected by the vote of a plurality of the votes cast. For purposes of the election of directors, a “majority of votes cast” means that the number of votes cast “for” a director’s election exceeds the number of votes cast “against” that director’s election (with “abstentions” and “broker non-votes” not counted as votes cast either “for” or “against” that director’s election). In the event an incumbent director fails to receive a majority of votes cast in an election that is not a contested election, such incumbent director shall immediately tender his or her resignation in accordance with the procedures established by the nominating and corporate governance committee of the IAA board. The IAA board shall determine whether to accept the resignation or take other action, through a process managed by the nominating and corporate governance committee of the IAA board and following a recommendation of that committee. If such director’s resignation is not accepted by the IAA board, such director shall continue to serve until his successor is duly elected, or until his subsequent death, retirement, removal or resignation in accordance with its terms. |
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Removal of Directors | |||
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The CBCA provides that the shareholders of a corporation may by an ordinary resolution passed by a | | | The IAA certificate of incorporation provides that, subject to the rights, if any, of the holders of shares of |
RBA | | | IAA |
majority of votes cast by the shareholders who voted in respect of that resolution at a special meeting remove any director or directors from office. Where the holders of any class or series of shares of a Canadian corporation have an exclusive right to elect one or more directors, a director so elected may only be removed by an ordinary resolution at a meeting of the shareholders of that class or series. Under the CBCA, a director receiving more “against” votes than “for” votes in an uncontested election is required to tender his or her resignation to the RBA board promptly following the applicable shareholder meeting. If an incumbent director is not elected by a majority of “for” votes, such director will still be permitted to remain as a director until the earlier of: (a) the 90th day after the day of the election; or (b) the day on which their successor is appointed or elected. The elected directors also may only reappoint the incumbent director that did not receive majority support where such director’s election is required to satisfy the Canadian residency requirements under the CBCA, or the CBCA's requirement that at least two directors of a distributing corporation are not also officers or employees of the corporation or its affiliates. In accordance with the rules of the TSX, RBA has adopted a “majority voting” policy providing that a director that does not receive a majority of “for” votes in an uncontested election is required to tender his or her resignation to the RBA board promptly following the applicable shareholder meeting. The RBA board will then consider whether to accept or reject the resignation. | | | IAA preferred stock then outstanding, any director or the entire IAA board may be removed from office at any time by the affirmative vote of the holders of at least a majority in voting power of the issued and outstanding capital stock of IAA entitled to vote in the election of directors; provided, however that until such time as the IAA board is no longer classified pursuant to Section 141(d) of the DGCL, directors may be removed from office only for cause in accordance with Section 141(k) of the DGCL, following which directors may be removed from office with or without cause. |
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Shareholder & Stockholder Proposals and Director Nominations | |||
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Under RBA’s by-laws, an eligible RBA shareholder wishing to nominate a director for election to the RBA board is required to provide notice to RBA, in proper form, within the following time periods: • in the case of an annual meeting (including a meeting that is both an annual and special meeting) of RBA shareholders, not less than 30 days prior to the date of the meeting; provided, however, that in the event that the meeting is to be held on a date that is less than 50 days after the date on which the first public announcement of the date of the meeting was made, notice of the nomination will be made not later than the close of business on the 10th day following the first public announcement of the date of the meeting; and • in the case of a special meeting (which is not also | | | At an annual meeting of IAA stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (i) specified in a notice of meeting given by or at the direction of the IAA board, (ii) if not specified in a notice of meeting, otherwise brought before the meeting by the IAA board or the chair of the IAA board or (iii) otherwise properly brought before the meeting by a stockholder present in person who (A) (1) was a record owner of shares of capital stock of IAA both at the time of giving the notice provided for in the IAA bylaws and at the time of the meeting, (2) is entitled to vote at the meeting, and (3) has complied with the IAA bylaws in all applicable respects, including the notice requirements therein, or (B) properly made such proposal in accordance with Rule 14a-8 under the Exchange Act. The foregoing clause (iii) shall be the exclusive means for an IAA stockholder to propose |
RBA | | | IAA |
an annual meeting) of electing directors (whether or not also called for other purposes), not later than the close of business on the 15th day following the day on which the first public announcement of the date of the meeting was made | | | business to be brought before an annual meeting of IAA stockholders. The notice requirements generally require that, among other things, the proposing stockholder deliver a notice containing specified information, including with respect to any proposed item of business or director nominee(s) and the IAA proposing stockholder and other persons related to such stockholder’s solicitation of proxies, to IAA’s Secretary, not more than 120 days nor less than 90 days before the one-year anniversary of the preceding year’s annual meeting; provided, however, that in the event that the annual meeting is called for a date that is more than 30 days before or more than 60 days after such anniversary date, such notice must be delivered not more than 120 days prior to such annual meeting nor less than 90 days prior to the annual meeting or, if later, the 10th day following the day on which public disclosure of the date of such annual meeting was first made Nominations of any person for election to the IAA board at a special meeting (but only if the election of directors is a matter specified in the notice of meeting given by or at the direction of the person calling such special meeting) may be made at such meeting only (i) by or at the direction of the IAA board, including by any committee or persons authorized to do so by the IAA board or the IAA bylaws, or (ii) by a stockholder present in person (A) who was a record owner of shares of IAA both at the time of giving the notice provided for in the IAA bylaws and at the time of the meeting, (B) is entitled to vote at the meeting, and (C) has complied with the IAA bylaws as to such notice and nomination, including the notice requirements described above; provided, that, for purposes of a special meeting, such notice must be delivered to IAA’s Secretary not more than 120 days prior to such special meeting nor less than 90 days prior to such special meeting or, if later, the 10th day following the day on which public disclosure of the date of such special meeting was first made. The foregoing clause (ii) shall be the exclusive means for an IAA stockholder to make any nomination of a person or persons for election to the IAA board at a special meeting. |
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Shareholder Action by Written Consent | |||
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The CBCA allows any matters required to be voted on at a meeting to be approved by RBA shareholders pursuant to a written resolution signed by all of the RBA shareholders entitled to vote on the matter. | | | The IAA certificate of incorporation prohibits stockholder action by written consent and requires that any action required or permitted to be taken at any annual or special meeting of IAA stockholders may be taken only at a duly called meeting of the IAA stockholders. |
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RBA | | | IAA |
Notice of Shareholder Meetings | |||
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Under the CBCA, notice of the time and place of a meeting of RBA shareholders must be given not less than 21 days and not more than 60 days before the meeting to each director, to the auditor and to each RBA shareholder entitled to vote at the meeting. Notice of a meeting of shareholders at which special business is to be transacted must state (i) the nature of that business in sufficient detail to permit the shareholder to form a reasoned judgment thereon; and (ii) the text of any special resolution to be submitted to the meeting. | | | Whenever IAA stockholders are required or permitted to take any action at a meeting, a written notice of the meeting will be given that states the place, if any, date and hour of the meeting, the means of remote communications, if any, by which IAA stockholders and proxyholders may be deemed to be present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise required by law, written notice of any meeting shall be given not less than 10 nor more than 60 days before the date of the meeting to each IAA stockholder entitled to notice of and to vote at such meeting. |
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Adjournment of Shareholder Meetings | |||
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Shareholder meetings may be adjourned in the absence of a quorum by the affirmative vote of a majority of votes cast by RBA shareholders entitled to vote thereon and present in person or represented by proxy at the shareholder meeting. | | | In the absence of a quorum, any meeting of stockholders may be adjourned, from time to time, in the manner provided below until a quorum is present or represented. Any meeting of IAA stockholders may be adjourned from time to time to reconvene at the same or some other place, if any, and notice need not be given of such adjourned meeting if the time and place thereof and the means of remote communications, if any, by which IAA stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting are (i) announced at the meeting at which the adjournment is taken, (ii) displayed, during the time scheduled for the meeting, on the same electronic network used to enable IAA stockholders and proxyholders to participate in the meeting by means of remote communication, (iii) set forth in the notice of meeting given in accordance with the IAA bylaws, or (iv) are provided in any other manner permitted by the DGCL. At the adjourned meeting, IAA may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 30 days, notice of the adjourned meeting in accordance with the requirements of the IAA bylaws will be given to each IAA stockholder of record entitled to vote at the meeting. |
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Limitation of Personal Liability of Directors | |||
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According to the CBCA, no provision in a contract, the articles, by-laws or a resolution relieves a director or officer of a corporation from the duty to act in accordance with the CBCA or the regulations thereunder or relieves them from liability for a breach thereof. Any such duty or liability will be alleviated only to the extent that a unanimous shareholder agreement restricts the powers of the directors to manage or supervise the | | | The IAA certificate of incorporation provides that, to the fullest extent permitted by law, no IAA director shall be personally liable to IAA or any IAA stockholders for monetary damages for breach of fiduciary duty as a director of IAA, except to the extent such exemption from liability or limitation is not permitted under the DGCL. |
RBA | | | IAA |
management of, the business and affairs of the corporation. However, under the CBCA, a corporation may indemnify certain persons associated with the corporation against all reasonably incurred costs, charges, and expenses, including settlement amounts or judgments in respect of any proceeding in which such individual is involved because of his or her association with the corporation. | | | Section 102(b)(7) of the DGCL does not permit the limitation of a director’s liability for the following: • any breach of the director’s duty of loyalty to the company or its stockholders; • any act or omission not in good faith or which involved intentional misconduct or a knowing violation of law; • unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the DGCL; and • any transaction from which the director derived an improper benefit. |
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Indemnification of Directors and Officers | |||
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Under the CBCA, RBA may indemnify its directors and officers, its former directors and officers or another individual who acts or acted at RBA’s request as a director or officer, or an individual acting in a similar capacity, of another entity, which is referred to as an “indemnifiable person”, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by the indemnifiable person in respect of any civil, criminal, administrative, investigative or other proceeding in which the indemnifiable person is involved because of that association with RBA or other entity, provided that: • the indemnifiable person acted honestly and in good faith with a view to the best interests of RBA, or, as the case may be, to the best interests of the other entity for which the individual acted as director or officer or in a similar capacity at RBA’s request; and • in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the indemnifiable person had reasonable grounds for believing that the indemnifiable person’s conduct was lawful. Under RBA’s by-laws, RBA will indemnify a director or officer of RBA, a former director or officer of RBA, or another individual who acts or acted at RBA’s request as a director or officer, or an individual acting in a similar capacity, of another entity, to the extent permitted and in accordance with the CBCA. In addition, RBA may, under the CBCA and its by-laws, | | | The IAA bylaws provide that IAA shall indemnify and hold harmless, to the fullest extent permitted by the DGCL as it presently exists or may hereafter be amended, any threatened or existing party to any proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of IAA), by reason of the fact that such person is or was a director or officer of IAA, or while serving as a director or officer of IAA, is or was serving at the request of IAA as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or a covered person, against all liability and loss suffered and expenses (including attorneys’ fees, judgments, fines and amounts paid in settlement) actually and reasonably incurred by such covered person in connection with such proceeding if such covered person acted in good faith and in a manner such covered person reasonably believed to be in or not opposed to the best interests of IAA, and, with respect to any criminal proceeding, had no reasonable cause to believe such covered person’s conduct was unlawful. IAA also has the power, to the extent authorized by the IAA board, to indemnify and advance expenses to employees and agents of IAA similar to those conferred to directors and officers of IAA as described above. Expenses (including attorneys’ fees) incurred by any covered person in defending any proceeding will be paid, and expenses (including attorneys’ fees) incurred by any employee or agent of IAA may be paid, by IAA in advance of the final disposition of such proceeding; provided, however, that such payment of expenses in advance of the final disposition of the proceeding shall |
RBA | | | IAA |
purchase and maintain insurance for the benefit of an indemnifiable person against such liabilities and in such amounts as the RBA board may from time to time determine and are permitted by the CBCA. | | | be made only upon receipt of an undertaking by or on behalf of such covered person to repay all amounts advanced if it is ultimately determined that such person is not entitled to be indemnified by IAA as authorized in the IAA bylaws. Such expenses (including attorneys’ fees) incurred by former directors and officers or other employees and agents may be so paid upon such terms and conditions, if any, as IAA deems appropriate. IAA may purchase and maintain insurance on behalf of any person who is or was a director or officer of IAA, or is or was a director or officer of IAA serving at the request of IAA as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not IAA would have the power or the obligation to indemnify such person against such liability under the provisions of the IAA bylaws. |
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Rights Upon Liquidation | |||
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In the event of a liquidation, dissolution or winding up, holders of RBA common shares are entitled to share ratably in all assets remaining after payment of RBA’s liabilities and any liquidation preferences of any outstanding preferred shares. See the section entitled “Description of RBA’s Share Capital” for a summary of the liquidation rights of RBA Series A senior preferred shares. | | | In the event of any liquidation, dissolution or winding up, whether voluntary or involuntary, after payment or provision for the payment of the debt and liabilities of IAA and subject to the prior payment in full of the preferential amounts, if any, to which any series of IAA preferred stock may be entitled, the holders of shares of IAA common stock shall be entitled to receive the assets and funds of IAA remaining for distribution in proportion to the number of shares held by them, respectively. Under IAA’s certificate of incorporation, the IAA board has the authority to provide, among other things, that any class or series of preferred stock may be entitled to certain rights upon the dissolution of, or upon any distribution of the assets of, IAA. Thus, the issuance of IAA preferred stock could affect the rights of holders of IAA common stock, including by impairing the liquidation rights of holders of IAA common stock. |
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Stockholder Rights Plan | |||
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RBA has an amended and restated shareholder rights plan (which we refer to as the “RBA rights plan”) that was adopted to ensure, to the extent possible, that any take-over bid for RBA’s securities is conducted in accordance with Canadian take-over bid rules, which allows all RBA shareholders to benefit from the acquisition of a control position of 20% or more of the common shares and also allows the RBA board to have sufficient time to explore and develop all options for | | | The DGCL does not include a statutory provision expressly validating stockholder rights plans. However, such plans have generally been upheld by the decisions of courts applying Delaware law. IAA does not have a stockholder rights plan currently in effect. |
RBA | | | IAA |
maximizing shareholder value in the event a person tries to acquire a control position in RBA. The RBA rights plan creates a right that attaches to each present and subsequently issued RBA common share, and upon the occurrence of a flip-in event and after the close of business on the tenth trading day after first date of public announcement of any person (other than RBA or any subsidiary of RBA) that such person has become an acquiring person, will entitle RBA shareholders, including former IAA shareholders, to acquire one RBA common share at 50% of the market price at the time of exercise. | | | |
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Exclusive Forum | |||
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RBA’s bylaws do not provide for an exclusive forum. | | | The IAA charter and the IAA bylaws provides that, unless IAA consents in writing to the selection of an alternative forum, the sole and exclusive forum for certain actions is a state or federal court located within the State of Delaware. Subject to certain exceptions, these actions include (i) any derivative action or proceeding brought on behalf of IAA, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, stockholder, employee or agent of IAA to IAA or IAA’s stockholders, (iii) any action asserting a claim against IAA or any director, officer, stockholder, employee or agent of IAA arising out of or relating to any provision of the DGCL, IAA’s charter or IAA’s bylaws, or (iv) any action asserting a claim against IAA or any director, officer, stockholder, employee or agent of IAA governed by the internal affairs doctrine of the State of Delaware; provided, however, that, such exclusive choice of forum provision will not apply to suits brought to enforce any liability or duty created by the Exchange Act or the Securities Act. The IAA bylaws provide that, subject to the foregoing, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause or causes of action arising under the Securities Act, including all causes of action asserted against any defendant to such complaint. |
• | In the case of an IAA stockholder, such person must not vote, or abstain from voting, in favor of the proposal to adopt the merger agreement. In the case of a beneficial owner of IAA common stock, such person must not instruct such person’s broker, bank or other nominee to vote such person’s share, or abstain from voting, in favor of the proposal to adopt the merger agreement; |
• | the IAA stockholder or beneficial owner of IAA common stock must deliver to IAA a written demand for appraisal before the vote on the merger agreement at the IAA special meeting, which written demand must reasonably inform IAA of the identity of the IAA stockholder or beneficial owner of IAA common stock and that the IAA stockholder or beneficial owner of IAA common stock intends to demand appraisal of his, her or its shares. This written demand for appraisal must be in addition to and separate from any proxy or vote abstaining from or voting against the adoption of the merger agreement. Voting “AGAINST” or failing to vote “FOR” the adoption of the merger agreement by itself does not constitute a demand for appraisal within the meaning of Section 262; |
• | the IAA stockholder or beneficial owner of IAA common stock must continuously hold or beneficially own, as applicable, the shares of common stock from the date of making the demand through the effective time of the mergers (an IAA stockholder or beneficial owner of IAA common stock will lose appraisal rights if the IAA stockholder or beneficial owner of IAA common stock transfers the shares before the effective time of the mergers); and |
• | the IAA stockholder or beneficial owner of IAA common stock must otherwise comply with the procedures of Section 262, including filing a petition in the Delaware Court of Chancery requesting a determination of the fair value of the shares owned by such stockholder or beneficial owner within 120 days after the effective time of the mergers. The surviving corporation is under no obligation to file any petition and has no intention of doing so. |
• | each member of the RBA board; |
• | each named executive officer of RBA; |
• | the members of the RBA board and RBA’s current executive officers as a group; and |
• | each person known by RBA to beneficially own 5% or more of the outstanding RBA common shares. |
5% Shareholders | | | Shares Beneficially Owned | | | Ownership %(1) |
Massachusetts Financial Services Company(2) 111 Huntington Avenue Boston, Massachusetts 02199 | | | 10,578,495 | | | 9.5% |
Janus Henderson Group plc(3) 201 Bishopsgate London, EC2M 3AE, United Kingdom | | | 5,780,220 | | | 5.2% |
Beutel, Goodman & Company Ltd.(4) 20 Eglinton Ave. W., Suite 2000 Toronto, Ontario, M4R 1K8, Canada | | | 5,767,291 | | | 5.2% |
(1) | As of January 25, 2023, there were 110,887,811 common shares outstanding. |
(2) | As reported on Massachusetts Financial Services Company’s Schedule 13G as of December 31, 2021, Massachusetts Financial Services Company had sole voting power with respect to 9,587,357 common shares and sole dispositive power with respect to 10,578,495 common shares. |
(3) | As reported on Janus Henderson Group PLC’s Schedule 13G as of December 31, 2021, Janus Henderson Group PLC had shared voting and dispositive power with respect to 5,780,220 common shares. |
(4) | As reported on Beutel, Goodman & Company Ltd.’s Schedule 13G on December 31, 2022, Beutel, Goodman & Company Ltd. has sole voting power with respect to 5,547,496 common shares and sole dispositive power with respect to 5,767,291 common shares. |
Directors and Named Executive Officers | | | Shares Beneficially Owned | | | Ownership %(1) |
Ann Fandozzi(2) | | | 327,100 | | | * |
Sharon Driscoll(3) | | | 345,261 | | | * |
James Kessler(4) | | | 148,246 | | | * |
Baron Concors(5) | | | 88,452 | | | * |
Kari Taylor(6) | | | 120,690 | | | * |
Eric Jacobs | | | — | | | * |
Erik Olsson | | | — | | | — |
Adam DeWitt | | | — | | | — |
Robert G. Elton | | | — | | | — |
Lisa Hook | | | — | | | — |
Sarah Raiss | | | — | | | — |
Mahesh Shah | | | — | | | — |
Carol Stephenson | | | — | | | — |
Christopher Zimmerman | | | — | | | — |
All directors and executive officers as a group (16 individuals)(7) | | | 1,201,675 | | | 1.08% |
* | Less than 1%. |
The above tables exclude the shares purchased by Starboard pursuant to the securities purchase agreement on February 1, 2023. Such shares were not outstanding on the record date of January 25, 2023, and will not be voted at the RBA special meeting. See the section entitled “Recent Developments.” |
(1) | As of January 25, 2023, there were 110,887,811 common shares outstanding. |
(2) | Represents 12,182 common shares, 223,429 stock options exercisable and 91,489 performance share units releasable within 60 days of January 25, 2023. |
(3) | Represents 49,749 common shares, 283,763 stock options exercisable and 11,749 performance share units releasable within 60 days of January 25, 2023. |
(4) | Represents 320 common shares, 86,034 stock options exercisable and 61,892 performance share units releasable within 60 days of January 25, 2023. |
(5) | Represents 1,050 common shares, 67,596 stock options exercisable and 19,806 performance share units releasable within 60 days of January 25, 2023. |
(6) | Represents 8,952 common shares, 104,580 stock options exercisable and 7,158 performance share units releasable within 60 days of January 25, 2023. |
(7) | Represents 89,820 common shares, 891,773 stock options exercisable and 220,082 performance share units releasable within 60 days of January 25, 2023. |
• | each member of the IAA board; |
• | each named executive officer of IAA; |
• | the members of the IAA board and IAA’s executive officers as a group; and |
• | each other person known by IAA to beneficially own more than 5% of the outstanding shares of IAA common stock. |
Named Executive Officers and Directors: | | | Shares Beneficially Owned | | | Ownership % |
John W. Kett(1)(2) | | | 222,372 | | | *% |
Susan Healy | | | 469 | | | * |
Tim O’Day(1)(2) | | | 64,262 | | | * |
Sidney Peryar(1)(2) | | | 42,625 | | | * |
Maju Abraham(1)(2) | | | 27,650 | | | * |
John P. Larson(3) | | | 28,375 | | | * |
Brian Bales(3) | | | 11,918 | | | * |
William Breslin(3) | | | 12,942 | | | * |
Sue Gove(3) | | | 11,918 | | | * |
Lynn Jolliffe(3) | | | 25,698 | | | * |
Peter Kamin(3) | | | 362,018 | | | * |
Olaf Kastner(3) | | | 9,662 | | | * |
Michael Sieger(3) | | | 3,714 | | | * |
All directors and executive officers as a group (13 persons)(4) | | | 823,623 | | | *% |
(*) | Represents beneficial ownership of less than one percent of outstanding shares of IAA common stock. |
(1) | Includes shares of IAA common stock underlying IAA options that are currently exercisable as follows: Mr. Kett (41,914 shares), Mr. O’Day (33,811 shares), Mr. Peryar (20,917 shares) and Mr. Abraham (15,979 shares). For Mr. Kett, also includes 5,000 shares of IAA common stock purchased on the open market on March 7, 2022. |
(2) | Includes shares of IAA common stock subject to vesting within 60 days of January 25, 2023 as follows: Mr. Kett (58,910 shares), Mr. O’Day (12,637 shares), Mr. Peryar (7,424 shares) and Mr. Abraham (5,217 shares). |
(3) | Includes shares of IAA common stock subject to IAA restricted stock as follows: Mr. Larson (5,571 shares), Mr. Bales (3,714 shares), Mr. Breslin (3,714 shares), Ms. Gove (3,714 shares), Mr. Kamin (3,714 shares), Mr. Kastner (3,714 shares), and Mr. Sieger (3,714 shares) and shares of IAA common stock subject to deferred stock units as follows: Mr. Larson (17,808 shares) and Ms. Jolliffe (8,856 shares). For Peter Kamin, also includes 350,100 shares of IAA common stock purchased on the open market from February 15, 2022 to March 8, 2022. |
(4) | Includes 112,621 shares of IAA common stock underlying IAA options that are currently exercisable. |
5% or Greater Stockholders: | | | Shares Beneficially Owned | | | Ownership % |
The Vanguard Group(2) | | | 12,279,290 | | | 9.2% |
BlackRock, Inc.(3) | | | 797,157 | | | 8.8% |
(1) | Based solely on information disclosed in Amendment No. 2 to a Schedule 13G filed by The Vanguard Group on February 10, 2022. According to this Schedule 13G/A, The Vanguard Group has sole dispositive power with respect to 12,080,577 shares, shared voting power with respect to 80,568 shares and shared dispositive power with respect to 198,713 shares of IAA common stock. The address of The Vanguard Group is 100 Vanguard Blvd., Malvern, Pennsylvania 19355. |
(2) | Based solely on information disclosed in a Schedule 13G filed by BlackRock, Inc. on January 25, 2023. According to this Schedule 13G/A, BlackRock, Inc. has sole voting power with respect to 11,511,374 shares and sole dispositive power with respect to 11,797,157 shares of IAA common stock. The address of BlackRock, Inc. is 55 East 52nd Street, New York, New York 10055. |
For RBA shareholders: | | | For IAA stockholders: |
| | ||
Ritchie Bros. Auctioneers Incorporated 9500 Glenlyon Parkway Burnaby, British Columbia, V5J 0C6, Canada Attn: Corporate Secretary (778) 331-5500 | | | IAA, Inc. Two Westbrook Corporate Center Suite 500 Westchester, Illinois, 60154 Attn: Corporate Secretary (708) 492-7000 |
• | RBA’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 17, 2022; |
• | the information specifically incorporated by reference in RBA’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 from RBA’s definitive proxy statement on Schedule 14A for RBA’s 2022 annual meeting of stockholders, filed with the SEC on March 15, 2022; |
• | RBA’s Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2022, June 30, 2022, and September 30, 2022 filed with the SEC on May 9, 2022, August 4, 2022, and November 7, 2022, respectively; |
• | RBA’s Current Reports on Form 8-K (excluding any information and exhibits furnished under Item 2.02 or 7.01 thereof) filed with the SEC on January 13, 2022, February 16, 2022, February 17, 2022, March 4, 2022, April 28, 2022, April 29, 2022, May 9, 2022, June 2, 2022, August 4, 2022, November 7, 2022, December 12, 2022, December 20, 2022, January 17, 2023, January 23, 2023 and February 1, 2023; and |
• | the RBA common shares contained in RBA’s registration statement on Form 8-A, filed with the SEC on February 22, 2007, as updated by Exhibit 4.1 to RBA’s Report on Form 8-K filed on February 28, 2019, including any subsequent amendment thereto or reports filed for the purpose of updating this description. |
• | RBA’s Annual Report on Form 10-K dated February 17, 2022 for the year ended December 31, 2021; |
• | RBA’s consolidated comparative financial statements, including the notes thereto, as at December 31, 2021 and 2020 and for each of the years in the three-year period ended December 31, 2021, together with the Report of Independent Registered Public Accounting Firm thereon; |
• | RBA’s management’s discussion and analysis dated February 17, 2022 for the year ended December 31, 2021; |
• | RBA’s management proxy circular dated March 15, 2022 for an Annual and Special meeting of RBA shareholders held on April 27, 2022; |
• | RBA’s unaudited interim comparative consolidated financial statements dated November 7, 2022 for the three and nine months ended September 30, 2022; |
• | RBA’s management’s discussion and analysis dated November 7, 2022 for the three and nine months ended September 30, 2022; |
• | RBA’s material change report dated March 8, 2022 announcing that the UK’s Competition and Markets Authority intends to refer RBA’s proposed acquisition of Euro Auctions to a Phase 2 review process; |
• | RBA’s material change report dated May 2, 2022 announcing that its wholly owned indirect subsidiary, Ritchie Bros. UK Holdings Ltd. (“RB Purchaser”) is discontinuing the Phase 2 review by the UK Competition and Markets Authority and that the Sale and Purchase Agreement dated August 9, 2021 pursuant to which the RB Purchaser had agreed to purchase Euro Auctions Limited, William Keys & Sons Holdings Limited, Equipment & Plant Services Ltd and Equipment Sales Ltd. will automatically terminate on June 28, 2022; |
• | RBA’s material change report dated June 3, 2022 announcing that, effective June 6, 2022, Eric Jacobs will become RBA’s new Chief Financial Officer; |
• | RBA’s material change report dated November 7, 2022 announcing that it had entered into the merger agreement; |
• | RBA's material change report dated December 13, 2022 announcing that on December 9, 2022, it had entered into a sixth amendment to the credit agreement dated as of October 27, 2016, among RBA, as a borrower, certain of its subsidiaries, each as a borrower and/or guarantor, Bank of America, N.A., as administrative agent, U.S. swing line lender and a letter of credit issuer and the other lenders party thereto; |
• | RBA's material change report dated January 26, 2023 announcing that on January 22, 2023, it had into an agreement to amend certain terms of the merger agreement; and |
• | RBA's material change report dated January 26, 2023 announcing that on January 22, 2023, it had entered into a securities purchase agreement pursuant to which it agreed to issue and sell senior preferred shares and common shares of RBA to the Starboard purchasers. |
• | IAA’s Annual Report on Form 10-K for the fiscal year ended January 2, 2022, filed with the SEC on February 28, 2022; |
• | the information specifically incorporated by reference in IAA’s Annual Report on Form 10-K for the fiscal year ended January 2, 2022 from IAA’s definitive proxy statement on Schedule 14A for IAA’s 2022 annual meeting of stockholders, filed with the SEC on May 2, 2022; |
• | IAA’s Quarterly Reports on Form 10-Q for the fiscal quarters ended April 3, 2022, July 3, 2022, and October 2, 2022 filed with the SEC on May 10, 2022, August 9, 2022, and November 9, 2022, respectively; |
• | IAA’s Current Reports on Form 8-K (excluding any information and exhibits furnished under Item 2.02 or 7.01 thereof) filed with the SEC on February 11, 2022, April 29, 2022, May 10, 2022, June 17, 2022, June 17, 2022, August 9, 2022, November 7, 2022, November 7, 2022, November 7, 2022, December 20, 2022 (with respect to Item 8.01 only), January 17, 2023, and January 23, 2023; and |
• | the description of IAA capital stock contained in IAA’s registration statement on Form 10, filed with the SEC on June 28, 2018, as updated by Exhibit 4.1 to IAA’s Annual Report on Form 10-K for the fiscal year ended December 29, 2019, filed with the SEC on March 18, 2020, including any subsequent amendment thereto or reports filed for the purpose of updating this description. |
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| |
Definition | | | Section |
Agreement | | | Preamble |
Alternative Financing | | | Section 6.20(b) |
Appraisal Shares | | | Section 3.5 |
Assumed Company Option | | | Section 3.3(c) |
Assumed Company PRSU | | | Section 3.3(b) |
Assumed Company RSU | | | Section 3.3(a) |
Book-Entry Shares | | | Section 3.4(b)(ii) |
Cash Consideration | | | Section 3.1(b)(i) |
Certificates | | | Section 3.4(b)(i) |
Certificates of Merger | | | Section 2.2(b) |
Chosen Courts | | | Section 9.7(b) |
Closing | | | Section 2.2(a) |
Closing Date | | | Section 2.2(a) |
Closing Tax Opinion | | | Section 6.16(b) |
Code | | | Recitals |
Company | | | Preamble |
Company 401(k) Plan | | | Section 6.9(b) |
Company Alternative Acquisition Agreement | | | Section 6.3(d)(iv) |
Company Applicable Date | | | Section 4.5(a) |
Company Board | | | Recitals |
Company Board Recommendation | | | Section 4.3(a) |
Company Capital Stock | | | Section 4.2(a) |
Company Change of Recommendation | | | Section 6.3(d)(vii) |
Company Common Stock | | | Recitals |
Company Contracts | | | Section 4.19(b) |
Company Designees | | | Section 2.7(a) |
Company Disclosure Letter | | | ARTICLE IV |
Company Employee | | | Section 4.10(i) |
Company Equity Awards | | | Section 4.2(c) |
Company Equity Plan | | | Section 3.3(a) |
Company FA | | | Section 4.24 |
Company Insurance Policies | | | Section 4.20 |
Definition | | | Section |
Company Leased Real Property | | | Section 4.15 |
Company Material Adverse Effect | | | Section 4.1 |
Company Owned Real Property | | | Section 4.15 |
Company Permits | | | Section 4.9(a) |
Company Phantom Stock Award | | | Section 3.3(e) |
Company Preferred Stock | | | Section 4.2(a) |
Company PRSU Award | | | Section 3.3(b) |
Company Real Property Lease | | | Section 4.15 |
Company Related Party Transaction | | | Section 4.23 |
Company Restricted Stock Award | | | Section 3.3(d) |
Company RSU Award | | | Section 3.3(a) |
Company SEC Documents | | | Section 4.5(a) |
Company Source Code | | | Section 4.14(g) |
Company Stock Option | | | Section 3.3(c) |
Company Stockholders Meeting | | | Section 4.4 |
Definition | | | Section |
Company Tax Certificate | | | Section 6.16(b) |
Confidentiality Agreement | | | Section 6.7(b) |
Continuing Employees | | | Section 6.9(a) |
Creditors’ Rights | | | Section 4.3(a) |
D&O Insurance | | | Section 6.10(a) |
days | | | Section 9.4(e) |
Debt Commitment Letter | | | Section 5.25(a) |
Debt Financing | | | Section 5.25(a) |
DGCL | | | Section 2.1(a) |
Directors Deferred Compensation Plan | | | Section 3.3(e) |
DLLCA | | | Section 2.1(a) |
DTC | | | Section 3.4(b)(ii) |
e-mail | | | Section 9.3 |
Eligible Shares | | | Section 3.1(b)(i) |
Exchange Agent | | | Section 3.4(a) |
Exchange Fund | | | Section 3.4(a) |
Exchange Ratio | | | Section 3.1(b)(i) |
Excluded Shares | | | Section 3.1(b)(iii) |
FCPA | | | Section 4.17(a) |
Final Exercise Date | | | Section 3.3(f) |
Financing Indemnitees | | | Section 6.20(e) |
First Merger | | | Recitals |
First Merger Effective Time | | | Section 2.2(b) |
GAAP | | | Section 4.5(b) |
HSR Act | | | Section 4.4 |
Indemnified Person | | | Section 6.10(a) |
Indemnifying Parties | | | Section 6.10(c) |
International Trade Laws | | | Section 4.17(b) |
Joint Proxy Statement | | | Section 4.4 |
Junior Preferred Shares | | | Section 5.2(a) |
Definition | | | Section |
Letter of Transmittal | | | Section 3.4(b)(i) |
made available | | | Section 9.4(e) |
Measurement Date | | | Section 4.2(a) |
Merger Consideration | | | Section 3.1(b)(i) |
Merger Sub 1 | | | Preamble |
Merger Sub 2 | | | Preamble |
Mergers | | | Recitals |
Outside Date | | | Section 8.1(b)(ii) |
Parent | | | Preamble |
Parent 401(k) Plan | | | Section 6.9(b) |
Parent Alternative Acquisition Agreement | | | Section 6.4(c)(iv) |
Parent Applicable Date | | | Section 5.5(a) |
Parent Board | | | Recitals |
Parent Board Recommendation | | | Section 5.3(a) |
Parent Capital Shares | | | Section 5.2(a) |
Parent Change of Recommendation | | | Section 6.4(c)(vii) |
Parent Common Shares | | | Recitals |
Parent Contracts | | | Section 5.18(b) |
Parent Designees | | | Section 2.7(a) |
Parent Disclosure Letter | | | ARTICLE V |
Definition | | | Section |
Parent Employee | | | Section 5.10(g) |
Parent Leased Real Property | | | Section 5.15 |
Parent Material Adverse Effect | | | Section 5.1 |
Parent Nominating Committee | | | Section 2.7(a) |
Parent Owned Real Property | | | Section 5.15 |
Parent Permits | | | Section 5.9(a) |
Parent Plan | | | Section 6.9(c) |
Parent Preferred Shares | | | Section 5.2(a) |
Parent Privacy Requirements | | | Section 4.14(h) |
Parent Public Documents | | | Section 5.5(a) |
Parent Real Property Lease | | | Section 5.15 |
Parent Registered Intellectual Property | | | Section 5.14(a) |
Parent Related Party Transaction | | | Section 5.21 |
Parent Share Issuance | | | Recitals |
Parent Shareholders Meeting | | | Section 4.4 |
Parent Source Code | | | Section 5.14(g) |
Parent Tax Certificate | | | Section 6.16(a) |
Payoff Letters | | | Section 6.19(a) |
pdf | | | Section 2.2(a) |
Post-Effective Time Dividends | | | Section 3.4(f) |
Privacy Requirements | | | Section 4.14(h) |
Registration Statement | | | Section 4.4 |
Reorganization Treatment | | | Recitals |
Required Amount | | | Section 5.25(a) |
Second Merger | | | Recitals |
Definition | | | Section |
Second Merger Effective Time | | | Section 2.2(b) |
Senior Notes Redemption | | | Section 6.19(b)(iii) |
Senior Preferred Shares | | | Section 5.2(a) |
Share Consideration | | | Section 3.1(b)(i) |
Surviving Corporation | | | Section 2.1(a) |
Surviving Corporation Stock | | | Section 3.1(a) |
Surviving LLC | | | Section 2.1(b) |
Tail Policy | | | Section 6.10(b) |
Tax Certificate | | | Section 6.16(a) |
Terminable Breach | | | Section 8.1(b)(iii) |
Top Company Customers | | | Section 4.27 |
Top Parent Customers | | | Section 5.24 |
Transaction Litigation | | | Section 6.11 |
US Holdings | | | Preamble |
2023 Bonus | | | Section 6.9(d) |
2023 Bonus Participant | | | Section 6.9(d) |
2023 Parent AGM | | | Section 2.7(b) |
| | (i) | | | if to Parent, US Holdings, Merger Sub 1 or Merger Sub 2, to: | ||||
| | | | | | ||||
| | | | Ritchie Bros. Auctioneers Incorporated 9500 Glenlyon Parkway Burnaby, BC V5J 0C6 | |||||
| | | | Attention: | | | Ann Fandozzi Darren Watt | ||
| | | | E-mail: | | | ***************** ***************** | ||
| | | | | | ||||
| | | | with a required copy to (which copy shall not constitute notice): | |||||
| | | | | | ||||
| | | | Goodwin Procter LLP 100 Northern Avenue Boston, MA 02210 | |||||
| | | | | | ||||
| | | | Attention: | | | Stuart M. Cable Lisa R. Haddad Mark S. Opper Jean A. Lee | ||
| | | | | | ||||
| | | | E-mail: | | | ***************** ***************** ***************** ***************** | ||
| | | | | | ||||
| | | | and a required copy to (which copy shall not constitute notice): | |||||
| | | | | | ||||
| | | | McCarthy Tétrault LLP Suite 2400 745 Thurlow Street Vancouver, BC V6E 0C5 | |||||
| | | | Attention: | | | David Frost | ||
| | | | E-mail: | | | ***************** | ||
| | | | | | ||||
| | (ii) | | | if to the Company, to: | ||||
| | | | | | ||||
| | | | IAA, Inc. Two Westbrook Corporate Center, Suite 500 Westchester, IL 60154 | |||||
| | | | Attention: | | | John Kett Sidney Peryar | ||
| | | | E-mail: | | | ***************** ***************** | ||
| | | | | |
| | | | with a required copy to (which copy shall not constitute notice): | |||||
| | | | | | ||||
| | | | Cooley LLP 3 Embarcadero Center 20th Floor San Francisco, CA 94111-4004 | |||||
| | | | Attention: | | | Jamie Leigh John-Paul Motley Ian Nussbaum Bill Roegge | ||
| | | | E-mail: | | | ***************** ***************** ***************** ***************** | ||
| | | | | | ||||
| | | | and a required copy to (which copy shall not constitute notice): | |||||
| | | | | | ||||
| | | | Blake, Cassels & Graydon LLP 199 Bay Street, Suite 400, Commerce Court West Toronto, Ontario, M5L 1A9 | |||||
| | | | | | ||||
| | | | Attention: | | | Geoffrey S. Belsher Susan Tomaine | ||
| | | | E-mail: | | | ***************** ***************** |
| | RITCHIE BROS. AUCTIONEERS INCORPORATED | ||||
| | | | |||
| | By: | | | /s/ Ann Fandozzi | |
| | Name: | | | Ann Fandozzi | |
| | Title: | | | Chief Executive Director | |
| | | | |||
| | RITCHIE BROS. HOLDINGS INC. | ||||
| | | | |||
| | By: | | | /s/ Kari Taylor | |
| | Name: | | | Kari Taylor | |
| | Title: | | | President | |
| | | | |||
| | IMPALA MERGER SUB I, LLC | ||||
| | | | |||
| | By: | | | /s/ Eric Jacobs | |
| | Name: | | | Eric Jacobs | |
| | Title: | | | President | |
| | | | |||
| | IMPALA MERGER SUB II, LLC | ||||
| | | | |||
| | By: | | | /s/ Eric Jacobs | |
| | Name: | | | Eric Jacobs | |
| | Title: | | | President |
| | IAA, INC. | ||||
| | | | |||
| | By: | | | /s/ John Kett | |
| | Name: | | | John Kett | |
| | Title: | | | Chief Executive Officer and President |
1. | Amendments. |
2. | Representations and Warranties. |
| | RITCHIE BROS. AUCTIONEERS INCORPORATED | ||||
| | |||||
| | By: | | | /s/ Ann Fandozzi | |
| | Name: Ann Fandozzi | ||||
| | Title: Chief Executive Officer | ||||
| | |||||
| | RITCHIE BROS. HOLDINGS INC. | ||||
| | |||||
| | By: | | | /s/ Jake Lawson | |
| | Name: Jake Lawson | ||||
| | Title: President | ||||
| | |||||
| | IMPALA MERGER SUB I, LLC | ||||
| | |||||
| | By: | | | /s/ Eric Jacobs | |
| | Name: Eric Jacobs | ||||
| | Title: President | ||||
| | |||||
| | IMPALA MERGER SUB II, LLC | ||||
| | |||||
| | By: | | | /s/ Eric Jacobs | |
| | Name: Eric Jacobs | ||||
| | Title: President |
| | IAA, INC. | ||||
| | |||||
| | By: | | | /s/ John Kett | |
| | Name: John Kett | ||||
| | Title: Chief Executive Officer and President |
1. | The issuance by Ritchie Bros. Auctioneers Incorporated (“RBA”) of up to 71,100,000 common shares of RBA (the “Consideration Shares”), to securityholders of IAA, Inc. (“IAA”), pursuant to the terms of the Agreement and Plan of Merger and Reorganization dated as of November 7, 2022 (the “Original Merger Agreement”), as amended by that certain Amendment to the Agreement and Plan of Merger and Reorganization, dated as of January 22, 2023 (together with the Original Merger Agreement, as it may be further amended from time to time (the “Merger Agreement”), by and among RBA, Ritchie Bros. Holdings Inc., Impala Merger Sub I, LLC, Impala Merger Sub II, LLC and IAA, all in connection with the combination of RBA and IAA as provided for by the Merger Agreement, is hereby authorized and approved. |
2. | The Consideration Shares will, when issued, be validly issued as fully paid and non-assessable common shares in the capital of RBA and, where applicable, the registrar and transfer agent of the RBA common shares from time to time is hereby authorized upon receipt of a direction from any one director or officer of RBA to countersign and deliver certificates, or other evidence of issuance, in respect of the Consideration Shares. |
3. | Any one director or officer of RBA be and is hereby authorized and directed to execute and deliver for and in the name of and on behalf of RBA all such certificates, instruments, agreements, documents and notices and to do all such other acts and things as in such person’s opinion may be necessary or desirable for the purpose of giving effect to these resolutions.” |
![]() | | | |
(GOLDMAN SACHS & CO. LLC) | | |
![]() | | | Guggenheim Securities, LLC 330 Madison Avenue New York, New York 10017 GuggenheimPartners.com |
• | Reviewed the Original Agreement; |
• | Reviewed a draft of the Amendment to the Agreement and Plan of Merger and Reorganization dated as of January 22, 2023; |
• | Reviewed certain publicly available business and financial information regarding each of Ritchie Bros. and IAA; |
• | Reviewed certain non-public business and financial information regarding Ritchie Bros.’ and IAA’s respective businesses and future prospects (including certain financial projections for Ritchie Bros. for the period beginning September 30, 2022 and ending December 31, 2026 and for IAA for period beginning September 30, 2022 and ending December 31, 2026 (together, the “Parent-Provided Financial Projections”) and certain other estimates and other forward-looking information), all as prepared and approved for our use by Ritchie Bros. (collectively with the Synergy Estimates (as defined below), the “Parent-Provided Information”); |
• | Reviewed certain non-public business and financial information regarding IAA’s business and future prospects (including certain financial projections for IAA on a stand-alone basis for the period beginning September 30, 2022 and ending December 31, 2026 (the “IAA-Provided Financial Projections” and, together with the Parent-Provided Financial Projections, the “Financial Projections”) and certain other estimates and other forward-looking information), all as prepared and approved for our use by IAA’s senior management and reviewed by, discussed with and approved for our use by Ritchie Bros. (collectively, the “IAA-Provided Information”); |
• | Reviewed certain estimated operating and financial synergies expected to result from the Transactions and estimated costs to achieve the same (collectively, the “Synergy Estimates” or the “Synergies”), all as prepared and approved for our use by Ritchie Bros., and discussed with Ritchie Bros.’ and IAA’s senior management; |
• | Discussed with Ritchie Bros.’ senior management their strategic and financial rationale for the Transactions as well as their views of Ritchie Bros.’ and IAA’s respective businesses, operations, historical and projected financial results and future prospects and the commercial, competitive and regulatory dynamics in their respective sectors; |
• | Discussed with IAA’s senior management their views of IAA’s business, operations, historical and projected financial results and future prospects and the commercial, competitive and regulatory dynamics in the auto salvage sector; |
• | Performed discounted cash flow analyses based on the Parent-Provided Financial Projections and the Synergy Estimates; |
• | Reviewed the valuation and financial metrics of certain mergers and acquisitions that we deemed relevant in evaluating the Transactions; |
• | Reviewed the historical prices, trading multiples and trading activity of Parent Common Shares and IAA Common Stock; |
• | Compared the financial performance of Ritchie Bros. and IAA and the trading multiples and trading activity of Parent Common Shares and IAA Common Stock with corresponding data for certain other publicly traded companies that we deemed relevant in evaluating Ritchie Bros. and IAA; |
• | Reviewed the pro forma financial results, financial condition and capitalization of Ritchie Bros. giving effect to the Transactions; and |
• | Conducted such other studies, analyses, inquiries and investigations as we deemed appropriate. |
• | We have relied upon and assumed the accuracy, completeness and reasonableness of all industry, business, financial, legal, regulatory, tax, accounting, actuarial and other information provided by or discussed with Ritchie Bros. or IAA (including, without limitation, the Parent-Provided Information, the IAA-Provided Information and the Synergies Estimates) or obtained from public sources, data suppliers and other third parties. |
• | We (i) do not assume any responsibility, obligation or liability for the accuracy, completeness, reasonableness, achievability or independent verification of, and we have not independently verified, any such information (including, without limitation, the Parent-Provided Information, the IAA-Provided Information and the Synergies Estimates), (ii) express no view or opinion regarding the reasonableness or achievability of the Financial Projections, the Synergy Estimates, any other estimates and any other forward-looking information provided by Ritchie Bros. or IAA or the assumptions upon which any of the foregoing are based and (iii) have relied upon the assurances of Ritchie Bros.’ senior management that they are (in the case of the Parent-Provided Information and the Synergies Estimates) and have assumed that IAA’s senior management are (in the case of the IAA-Provided Information and the Synergies Estimates) unaware of any facts or circumstances that would make the Parent-Provided Information, the IAA-Provided Information or the Synergies Estimates incomplete, inaccurate or misleading. |
• | Specifically, with respect to (i) the Parent-Provided Financial Projections and the Synergy Estimates utilized in our analyses, (a) we have been advised by Ritchie Bros.’ senior management, and we have assumed, that the Parent-Provided Financial Projections and the Synergy Estimates have been reasonably prepared on bases reflecting the best currently available estimates and judgments of Ritchie Bros.’ senior management as to the expected future performance of Ritchie Bros. and IAA and the expected amounts and |
• | As Ritchie Bros. Board of Directors is aware, we previously rendered an opinion, dated as of November 6, 2022 (the “Original Opinion”), as to the fairness, from a financial point of view, of the Merger Consideration contemplated by the Original Agreement. The Original Opinion was based on, among other things, various financial analyses that were predicated on certain financial projections and forecasts for Ritchie Bros. and IAA for the fiscal years 2022 through 2026 (the “Original Financial Forecasts”). We have been advised by Ritchie Bros. Board of Directors and senior management to rely exclusively on the Original Financial Forecasts for purposes of our analyses and opinion. |
• | First, Acquiror may, at its election, declare a one-time special cash dividend on the common shares, without par value, of the Acquiror (the “Acquiror Common Shares”) in an amount not to exceed $1.08 per Acquiror Common Share, with a record date prior to the First Merger Effective Time (as defined in the Agreement) and conditioned upon the closing of the First Merger (as defined below); |
• | Second, Merger Sub 1 will be merged with and into the Company (the “First Merger”), and the Company will continue as the surviving corporation (in such capacity, the Company is referred to herein as the “Surviving Corporation”), and each share of Company Common Stock issued and outstanding immediately prior to the First Merger Effective Time, other than (i)shares of Company Common Stock held in treasury or owned by the Acquiror, US Holdings, Merger Sub 1 or Merger Sub 2 immediately prior to the First Merger Effective Time and, in each case, not held on behalf of third parties and (ii) Appraisal Shares (as defined in the Agreement), will be converted into the right to receive consideration per share equal to (A) $12.80 in cash (the “Cash Consideration)” and (B) 0.5252 Acquiror Common Shares (the “Share Consideration” and, together with the Cash Consideration, the “Consideration”); and |
• | Third, as soon as practicable following the First Merger Effective Time, the Surviving Corporation will be merged with and into Merger Sub 2, and Merger Sub 2 will continue as the surviving company (the “Surviving LLC”) and a wholly-owned subsidiary of US Holdings, and each share of Surviving Corporation Stock (as defined in the Agreement) issued and outstanding immediately prior to the Second Merger Effective Time (as defined in the Agreement) will be cancelled and cease to exist, while each limited liability company interest of Merger Sub 2 issued and outstanding immediately prior to the Second Merger Effective Time will remain issued and outstanding and will constitute the only outstanding limited liability company interests of the Surviving LLC. |
| | Fiscal Years Ended | | | Change | |||||||
(Dollars in millions) | | | January 2, 2022 | | | December 27, 2020 | | | $ | | | % |
United States | | | $1,429.2 | | | 1,134.4 | | | $294.8 | | | 26.0% |
International | | | 108.5 | | | 98.7 | | | 9.8 | | | 9.9% |
Total service revenues | | | $1,537.7 | | | $1,233.1 | | | $304.6 | | | 24.7% |
| | Fiscal Years Ended | | | Change | |||||||
(Dollars in millions) | | | January 2, 2022 | | | December 27, 2020 | | | $ | | | % |
United States | | | $134.1 | | | $80.7 | | | $53.4 | | | 66.2% |
International | | | 165.6 | | | 71.1 | | | 94.5 | | | 139.9% |
Total vehicle sales | | | $299.7 | | | $151.8 | | | $147.9 | | | 97.4% |
• | expedite the process of vehicle pick-up, towing and assignment |
• | transport vehicles inbound to or outbound from IAA’s facilities |
• | optimize the organization and management of inventory |
• | merchandize vehicles to engage buyers with detailed vehicle information |
• | facilitate the digital sale of vehicles to a global audience |
Selected Products and Services | | | Description |
Catastrophe (CAT) Services™ | | | Industry-leading strategic catastrophe response service focused on real estate capacity, operational execution, transportation logistics and vehicle merchandising and selling. |
CSAToday® | | | Online reporting and analysis tool that gives seller customers the ability to manage their vehicle assets and monitor salvage performance. |
IAA AuctionNow™ | | | IAA’s digital auction bidding and buying solution, which features inventory located at physical branches and offsite to a global buyer audience. |
IAA Buy Now™ | | | Provides a unit for sale for a specific price using analytical data between scheduled auctions. |
IAA Inspection Services® | | | Provides a technology-based system for remote vehicle inspections and appraisals. |
IAA Interact™ | | | Merchandising platform combining imagery, information, personalization and efficiency. |
IAA Loan Payoff™ | | | Mitigates the time-consuming process of managing a total loss claim requiring loan payoff and title release. |
IAA Market Value™ | | | A solution for seller customers looking to estimate the values of their vehicles based on user-provided information and historical auction data. |
IAA Timed Auctions™ | | | Offers a unit for sale for a specified period of time, allowing for competitive bidding and sale prior to a scheduled auction. |
IAA Title Services® | | | Full suite of title solutions services that facilitates title documentation, settlement and the title retrieval process. |
IAA Tow App™ | | | Mobile dispatch solution that assists the tow network. |
IAA Transport™ | | | An integrated shipping solution allowing buyers to schedule shipment of vehicles during the checkout process. |
• | On May 22, 2019, IAA entered into a purchase agreement, pursuant to which, it agreed to issue 5.5% unsecured senior notes due 2027 in an aggregate principal amount of $500 million (the “notes”) in a private offering exempt from the registration requirements of the Securities Act. |
• | On June 6, 2019, IAA issued the notes under an indenture with the U.S. Bank National Association (the “indenture”). Pursuant to the terms of the indenture, IAA pays interest on the notes at a rate of 5.5% per annum, with the notes maturing on June 15, 2027. At any time and from time to time, IAA may, at its option, redeem up to 40% of the original aggregate principal amount of the notes issued under the indenture with the proceeds of certain equity offerings. The indenture contains covenants which, among other things, restrict IAA and certain of its subsidiaries’ ability to pay dividends on or make other distributions in respect of equity interests or make other restricted payments, certain investments, incur liens on certain assets to secure debt, sell certain assets, consummate certain mergers or consolidations or sell all or substantially all assets. The indenture also imposes mandatory redemption obligations on IAA in the event of certain corporate actions. |
• | On June 27, 2019, IAA entered into an intercompany separation and distribution agreement with KAR (the “separation agreement”), pursuant to which, amongst other things, KAR distributed 100% of the issued and outstanding shares of IAA common stock to the holders of record of KAR’s common stock on a pro rata basis, with each shareholder of KAR receiving one share of IAA common stock for each share of KAR common stock held. In connection with the separation and distribution and in accordance with the terms of the separation agreement: (i) IAA entered into the 2019 credit agreement (as defined below) and the ancillary agreements (as defined below); and (ii) IAA agreed to certain restrictive covenants, including a non-compete provision for a term of five years from the date of the separation agreement. The separation agreement contained additional representations, warranties and conditions customary for a restructuring transaction of its nature. The separation agreement was effected on 12:01 a.m. Eastern Daylight Time on June 28, 2019. Immediately following the effective time, IAA became an independent publicly-traded company listed on the NYSE under the symbol “IAA”. |
• | In connection with IAA’s separation from KAR and pursuant to the terms of the separation agreement, IAA entered into three material ancillary agreements (collectively, the “ancillary agreements”), the details of which are as follows: |
• | a transition services agreement dated June 27, 2019 between KAR and IAA pursuant to which, amongst other things, KAR and IAA agreed to provide, on an interim, transitional basis and for a fee, various services to each other, including information technology, accounts payable, payroll and other financial functions and administrative services for a period of two years from the date of the separation agreement, which term expired June 27, 2021; |
• | a tax matters agreement dated June 27, 2019 between KAR and IAA (the “tax matters agreement”) pursuant to which, amongst other things, KAR and IAA agreed to terms that will generally govern their respective rights, responsibilities and obligations with respect to taxes, tax attributions, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes for any tax period ending on or before the distribution date, as well as tax periods beginning after the distribution date. In addition, the tax matters agreement imposed certain restrictions on IAA and its subsidiaries designed to preserve the tax-free status of the separation, the distribution and certain related transactions, and provided special rules that allocate tax liabilities in the event the separation, the distribution or certain related transactions failed to qualify as tax-free for U.S. federal income tax purposes; and |
• | an employment matters agreement dated June 27, 2019 between KAR and IAA (the “employment matters agreement”) pursuant to which, amongst other things, KAR and IAA allocated liabilities and responsibilities relating to employment matters, employee compensation and benefit plans and programs and other related matters with respect to the current and former employees and non-employee directors of each of KAR and IAA. |
• | On June 27, 2019, IAA amended and restated its certificate of incorporation and its bylaws changing its name to IAA, Inc. |
• | On June 27, 2019, the IAA board approved the 2019 omnibus stock and incentive plan (the “2019 OSIP”). The purpose of the 2019 OSIP is to provide an additional incentive to selected management employees, directors, independent contractors and consultants of IAA whose contributions are essential to the growth and success of IAA in order to strengthen the commitment of such persons, motivate such persons to faithfully and diligently perform their responsibilities and attract and retain competent and dedicated persons whose efforts will result in the long-term growth and profitability of IAA. |
• | On June 28, 2019, IAA entered into a credit agreement by and among IAA, JPMorgan Chase Bank, N.A., as administrative agent, and a syndicate of lenders (the “2019 credit agreement”). The 2019 credit agreement provided for, among other things: (i) a seven-year senior secured term loan facility in an aggregate principal amount of $800 million (the “term loan facility”); and (ii) a five-year revolving credit facility in an aggregate principal amount of $225 million (the “revolving credit facility”). The revolving credit facility also included a $50 million sub-limit for issuance of letters of credit and a $50 million sublimit for swing line loans. |
• | On July 31, 2019, IAA acquired DDI Technology, a leading electronic lien and title technology firm based in Lexington, South Carolina, for an initial purchase price of approximately $17 million, subject to adjustment. |
• | On September 10, 2019, IAA appointed Christopher Carlson to serve as its Vice President, Corporate Controller and principal accounting officer. |
• | On May 1, 2020, IAA entered into an incremental commitment agreement no. 1, by and among IAA and certain subsidiaries of IAA, JPMorgan Chase Bank, N.A., as administrative agent, and a syndicate of lenders. The agreement was entered into pursuant to the 2019 credit agreement and provided for an increase to available revolving commitments under the 2019 credit agreement by an additional $136 million, the proceeds of which may be used for working capital and general corporate purposes. The aggregate revolving commitments under the 2019 credit agreement was thus increased to $361 million. |
• | IAA completed the roll-out of its buyer digital transformation in the United States in April 2020 and in Canada in July 2020. As a result, IAA shifted to a fully online, digital auction model. IAA’s online marketplaces allow prospectus bidders to preview, bid and potentially buy vehicles prior to an auction event. |
• | On July 7, 2020, IAA entered into a credit agreement which provided for a revolving credit facility in an aggregate principal amount of C$10 million (the “canadian credit facility”). |
• | On April 30, 2021, IAA entered into a credit agreement between IAA, as borrower, the lenders party thereto from time to time, and JPMorgan Chase Bank, N.A. as administrative agent (the “2021 credit agreement”). The 2021 credit agreement provides for, among other things: (i) a senior secured term loan in an aggregate principal amount of $650 million (the “2021 term loan); and (ii) a senior secured revolving facility with revolving commitments in an aggregate principal amount of $525 million (the “2021 revolving credit facility and, together with the 2021 term loan, the “2021 credit facility”). Borrowing availability under the 2021 revolving credit facility is subject to no default or event of default under the 2021 credit agreement having occurred at the time of borrowing. The proceeds of the 2021 credit facility were used, along with cash on hand, to repay in full all outstanding borrowings under the 2019 credit agreement. The 2021 credit facility matures on April 30, 2026. Pursuant to the terms of the 2021 credit agreement, among other things: |
• | borrowings bear interest at: (1) the highest of the prime rate, the federal funds rate plus 0.5%, or one-month LIBOR plus 1.00% (the “base rate”); or (2) LIBOR, in each case plus an applicable margin ranging from 0.375% to 1.25% with respect to base rate borrowings and 1.375% to 2.25% with respect to eurodollar borrowings, in each case, depending on IAA’s consolidated net leverage ratio; |
• | the unused amount of the 2021 revolving credit facility is subject to a commitment fee ranging from 0.175% and 0.30% depending on the IAA’s consolidated net leverage ratio; and |
• | IAA must comply with certain financial covenants and provided other affirmative and negative covenants that are usual and customary for a senior secured credit agreement and customary events of default. |
• | On May 5, 2021, IAA terminated the Canadian Credit Facility. |
• | On June 18, 2021, IAA acquired Marisat, Inc. d/b/a Auto Exchange, a salvage auction provider located in New Jersey. |
• | On September 1, 2021, Vance Johnston, former Executive Vice President and Chief Financial Officer resigned from his position and Susan Healy, Chief Financial officer, was appointed in his place to serve as IAA’s principal financial officer. |
• | On October 26, 2021, IAA acquired SYNETIQ Ltd. (“SYNETIQ”), a leading integrated salvage and vehicle dismantling company in the United Kingdom, providing services at every stage of the salvage journey, from salvage, sale, dismantling and parts sales to scrappage. |
• | On November 6, 2022, the IAA board approved and adopted an amendment and restatement of IAA’s bylaws to, amongst other things, amend the advance notice requirements applicable therein, adopt an exclusive forum provision designating the U.S. federal courts as the exclusive forum for all claims arising under the Securities Act of 1933, as amended, and address recent amendments to the DGCL. |
• | On November 7, 2022, IAA entered into the merger agreement, providing for RBA’s acquisition of IAA in a stock and cash transaction. See the section entitled “The Merger Agreement” for a summary of the key terms with respect to the merger agreement. |
• | On January 22, 2023, IAA entered into the merger agreement amendment. See the section entitled ‘‘The Merger Agreement” for a summary of the key terms contained therein. |
• | On January 22, 2023, IAA entered into a cooperation agreement with Ancora and certain of its affiliates regarding RBA's acquisition of IAA, the membership and composition of the Board in certain circumstances and related matters (the “cooperation agreement”). Pursuant to the cooperation agreement, Ancora committed to appear at the special meeting of IAA stockholders to consider and vote in favour of the transactions contemplated by the original merger agreement, as amended by the merger agreement amendment, and, subject to certain limited exceptions, in favour of all proposals submitted to the IAA stockholders at such meeting. Amongst other provisions, the cooperation agreement includes a standstill period beginning on the date of the cooperation agreement and ending on the later of the closing of the transactions contemplated by the merger agreement amendment or the conclusion of the 2023 annual general meeting of IAA stockholders. |
• | exposure to foreign currency exchange rate risk, which may have an adverse impact on IAA’s revenues and profitability; |
• | exposure to the principal or purchase auction model rather than the agency or consignment model, which may have an adverse impact on IAA’s margins and expose IAA to inventory risks; |
• | restrictions on IAA’s ability to repatriate funds, as well as repatriation of funds currently held in foreign jurisdictions, which may result in higher effective tax rates; |
• | tariffs and trade barriers and other regulatory or contractual limitations on IAA’s ability to operate in certain foreign markets; |
• | compliance with the Foreign Corrupt Practices Act; |
• | compliance with the various privacy regulations, including the GDPR; |
• | dealing with unfamiliar regulatory agencies and laws favoring local competitors; |
• | dealing with political and/or economic instability; |
• | the difficulty of managing and staffing foreign offices, as well as the increased travel, infrastructure, legal and compliance costs associated with international operations; |
• | localizing IAA’s product offerings; and |
• | adapting to different business cultures and market structures. |
• | limiting IAA’s ability to borrow additional amounts to fund working capital, capital expenditures, debt-service requirements, execution of IAA’s business strategy, acquisitions and other purposes; |
• | requiring IAA to dedicate a substantial portion of IAA’s cash flow from operations to pay principal and interest on debt, which would reduce the funds available for other purposes, including funding future expansion; |
• | making IAA more vulnerable to adverse changes in general economic, industry and competitive conditions, in government regulation and in IAA’s business by limiting IAA’s flexibility in planning for, and making it more difficult to react quickly to, changing conditions; and |
• | exposing IAA to risks inherent in interest rate fluctuations because the majority of IAA’s indebtedness is at variable rates of interest, which could result in higher interest expenses in the event of increases in interest rates. |
• | IAA’s debt holders could declare all outstanding principal and interest to be due and payable; |
• | the lenders under IAA’s senior secured credit facilities could terminate their commitments to lend IAA money and foreclose against the assets securing their borrowings; and |
• | IAA could be forced into bankruptcy or liquidation. |
Category of Holder | | | Number of IAA options | | | Weighted Average Exercise Price | | | Expiration Date |
All executive officers and past executive officers, as a group | | | 112,621 IAA options | | | $46.97 | | | 10 years from issue date(1) |
All directors and past directors who are not also executive officers, as a group | | | Nil | | | — | | | — |
All executive officers and past executive officers of any of IAA’s subsidiaries, as a group | | | Nil | | | — | | | — |
All of the directors and past directors who are not also executive officers of any of IAA’s subsidiaries, as a group | | | Nil | | | — | | | — |
All other employees and past employees, as a group | | | 121,521 IAA options | | | $31.72 | | | 10 years from issue date(1) |
All other employees and past employees of any of IAA’s subsidiaries, as a group | | | Nil | | | Nil | | | — |
All consultants, as a group | | | Nil | | | — | | | — |
(1) | Subject to certain circumstances, including earlier expiration in the event of termination, death or retirement. |
Date of Issuance | | | Description of Securities Issued | | | Number of Securities |
September 12, 2022 | | | IAA PRSU awards | | | 1,908 |
September 12, 2022 | | | IAA RSU awards | | | 4,251 |
June 15, 2022 | | | IAA restricted stock awards | | | 30,826 |
June 15, 2022 | | | IAA RSU awards | | | 4,456 |
May 19, 2022 | | | IAA RSU awards | | | 26,358 |
April 20, 2022 | | | IAA PRSU awards | | | 1,473.5 |
April 20, 2022 | | | IAA RSU awards | | | 11,794.5 |
March 28, 2022 | | | IAA PRSU awards | | | 147,555 |
March 28, 2022 | | | IAA RSU awards | | | 193,266 |
Month | | | Price Range (US$) | | | Volume | |||
| High | | | Low | | ||||
January 2022 | | | 51.12 | | | 41.37 | | | 5,039,261 |
February 2022 | | | 47.36 | | | 32.84 | | | 9,803,599 |
March 2022 | | | 40.49 | | | 31.33 | | | 11,451,642 |
April 2022 | | | 39.29 | | | 35.85 | | | 5,129,705 |
May 2022 | | | 39.83 | | | 32.46 | | | 8,721,318 |
June 2022 | | | 39.37 | | | 32.00 | | | 7,847,163 |
July 2022 | | | 37.92 | | | 32.21 | | | 5,144,915 |
August 2022 | | | 39.00 | | | 34.79 | | | 6,360,762 |
September 2022 | | | 37.99 | | | 31.5 | | | 7,754,972 |
October 2022 | | | 38.69 | | | 31.79 | | | 6,065,961 |
November 2022 | | | 41.71 | | | 36.4 | | | 12,660,052 |
December 2022 | | | 40.66 | | | 36.75 | | | 25,214,286 |
January 2023 | | | 43.88 | | | 38.71 | | | 60,585,200 |
February 1, 2023 to February 8, 2023 | | | 43.06 | | | 41.5 | | | 8,728,562 |
Name, Age and Jurisdiction of Residence | | | Current Position | | | Principal Occupation in the Last Five Years |
John P. Larson, 59 (5) Colorado, United States | | | Director, Chairman | | | June 2019 – Present: Chairman of the Board of IAA, Inc. and June 2022 – Present: Executive Chairman of Bestop, Inc. 2015 – June 2022: Chief Executive Officer of Bestop, Inc. 2015 – June 2019: Lead Independent Director, KAR Auction Services |
| | | | |||
John W. Kett, 59 (5) Illinois, United States | | | Director, President, and Chief Executive Officer | | | May 2014 – Present: Chief Executive Officer, IAA |
| | | | |||
Brian Bales, 59 (1)(4) Arizona, United States | | | Director | | | February 2015 – Present: Executive Vice President and Chief Development Officer of Republic Services, Inc. |
| | | | |||
Bill Breslin, 73 (2)(3) Texas, United States | | | Director | | | January 2009 – Present: Founder and Chief Executive Officer of Wenonah Consulting |
| | | | |||
Sue Gove, 63 (1)(4)(5) Texas, United States | | | Director | | | October 2022 – President & Chief Executive Officer, Bed Bath & Beyond Inc. August 2014 – Present: President of Excelsior Advisors, LLC |
| | | | |||
Lynn Jolliffe, 70 (1)(2)(3) Florida, United States | | | Director | | | January 2015 – Present: Chief Executive Officer of Jolliffe Solutions, Inc. |
| | | | |||
Olaf Kastner, 66 (2)(4)(5) Puchheim Germany | | | Director | | | December 2015 – September 2018: Former Regional President and Chief Executive Officer for China for the BMW Group |
| | | | |||
Peter Kamin, 60 (1)(3) Florida, United States | | | Director | | | January 2012 – Present: Founder and Managing Partner of 3K Limited Partnership |
| | | | |||
Michael Sieger, 61 (3)(5) Florida, United States | | | Director | | | January 2015 – January 2022: Claims President at The Progressive Corporation |
| | | |
Name, Age and Jurisdiction of Residence | | | Current Position | | | Principal Occupation in the Last Five Years |
Susan Healy, 56 Wisconsin, United States | | | Executive Vice President and Chief Financial Officer | | | September 2021 – Present: Executive Vice President and Chief Financial Officer, IAA September 2016 – January 2021: Senior Vice President, Finance for Ulta Beauty Inc. |
| | | | |||
Sidney Peryar, 48 Illinois, United States | | | Executive Vice President, Chief Legal Officer and Secretary | | | June 2019 – Present: Executive Vice President, Chief Legal Officer and Secretary, IAA February 2017 – June 2019: Senior Vice President, General Counsel and Secretary, IAA |
| | | | |||
Tim O’Day, 59 Illinois, United States | | | President, U.S. Operations | | | June 2019 – Present: President, U.S. Operations, IAA September 2015 – June 2019: Senior Vice President of Finance, IAA |
| | | | |||
Maju Abraham, 46 Illinois, United States | | | Senior Vice President and Chief Information Officer | | | June 2019 – Present: Senior Vice President and Chief Information Officer, IAA September 2014 – June 2019: Vice President of Business Technology, IAA |
(1) | Member of the Audit Committee, with Sue Gove as Committee Chair. |
(2) | Member of the Compensation Committee, with Lynn Jolliffe as Committee Chair. |
(3) | Member of the Nominating & Corporate Governance Committee, with Peter Kamin as Committee Chair. |
(4) | Member of the Risk & Sustainability Committee, with Brian Bales as Committee Chair. |
• | the original merger agreement, as amended by the merger agreement amendment; |
• | the cooperation agreement; |
• | the 2021 credit agreement; |
• | the separation agreement; |
• | the tax matters agreement; |
• | the employment matters agreement; and |
• | the indenture. |
| | Fiscal Years Ended | | | Change | |||||||
(Dollars in millions except per share amounts) | | | January 2, 2022 | | | December 27, 2020 | | | $ | | | % |
Revenues: | | | | | | | | | ||||
Service revenues | | | $1,537.7 | | | $1,233.1 | | | $304.6 | | | 24.7% |
Vehicle sales | | | 299.7 | | | 151.8 | | | 147.9 | | | 97.4% |
Total revenues | | | 1,837.4 | | | 1,384.9 | | | 452.5 | | | 32.7% |
Cost of services and vehicle sales: | | | | | | | | | ||||
Cost of services | | | 851.5 | | | 721.7 | | | 129.8 | | | 18.0% |
Cost of vehicle sales | | | 261.2 | | | 125.2 | | | 136.0 | | | 108.6% |
Total cost of services and vehicle sales | | | 1,112.7 | | | 846.9 | | | 265.8 | | | 31.4% |
Gross profit | | | 724.7 | | | 538.0 | | | 186.7 | | | 34.7% |
Selling, general and administrative | | | 192.3 | | | 144.9 | | | 47.4 | | | 32.7% |
Depreciation and amortization | | | 86.5 | | | 81.1 | | | 5.4 | | | 6.7% |
Operating profit | | | 445.9 | | | 312.0 | | | 133.9 | | | 42.9% |
Interest expense | | | 57.7 | | | 56.0 | | | 1.7 | | | 3.0% |
Other expense (income), net | | | 0.2 | | | (1.0) | | | 1.2 | | | NM* |
Income before income taxes | | | 388.0 | | | 257.0 | | | 131.0 | | | 51.0% |
Income taxes | | | 93.6 | | | 62.2 | | | 31.4 | | | 50.5% |
Net income | | | $294.4 | | | $194.8 | | | $99.6 | | | 51.1% |
| | Fiscal Years Ended | | | Change | |||||||
(Dollars in millions except per share amounts) | | | January 2, 2022 | | | December 27, 2020 | | | $ | | | % |
Net income per share | | | | | | | | | ||||
Basic | | | $2.18 | | | $1.45 | | | $0.73 | | | 50.3% |
Diluted | | | $2.18 | | | $1.44 | | | $0.74 | | | 51.4% |
* | NM - Not meaningful |
| | Fiscal Years Ended | | | Change | |||||||
(Dollars in millions) | | | January 2, 2022 | | | December 27, 2020 | | | $ | | | % |
United States | | | $1,429.2 | | | $1,134.4 | | | $294.8 | | | 26.0% |
International | | | 108.5 | | | 98.7 | | | 9.8 | | | 9.9% |
Total service revenues | | | $1,537.7 | | | $1,233.1 | | | $304.6 | | | 24.7% |
| | Fiscal Years Ended | | | Change | |||||||
(Dollars in millions) | | | January 2, 2022 | | | December 27, 2020 | | | $ | | | % |
United States | | | $134.1 | | | $80.7 | | | $53.4 | | | 66.2% |
International | | | 165.6 | | | 71.1 | | | 94.5 | | | 132.9% |
Total vehicle sales | | | $299.7 | | | $151.8 | | | $147.9 | | | 97.4% |
| | Fiscal Years Ended | | | Change | |||||||
(Dollars in millions) | | | January 2, 2022 | | | December 27, 2020 | | | $ | | | % |
United States | | | $776.3 | | | $659.8 | | | $116.5 | | | 17.7% |
International | | | 75.2 | | | 61.9 | | | 13.3 | | | 21.5% |
Total cost of services | | | $851.5 | | | $721.7 | | | $129.8 | | | 18.0% |
| | Fiscal Years Ended | | | Change | |||||||
(Dollars in millions) | | | January 2, 2022 | | | December 27, 2020 | | | $ | | | % |
United States | | | $118.1 | | | $64.6 | | | $53.5 | | | 82.8% |
International | | | 143.1 | | | 60.6 | | | 82.5 | | | 136.1% |
Total cost of vehicle sales | | | $261.2 | | | $125.2 | | | $136.0 | | | 108.6% |
| | Fiscal Years Ended | | | Change | |||||||
(Dollars in millions) | | | January 2, 2022 | | | December 27, 2020 | | | $ | | | % |
United States | | | $178.6 | | | $135.0 | | | $43.6 | | | 32.3% |
International | | | 13.7 | | | 9.9 | | | 3.8 | | | 38.4% |
Total selling, general and administrative expenses | | | $192.3 | | | $144.9 | | | $47.4 | | | 32.7% |
| | Fiscal Years Ended | | | Change | |||||||
(Dollars in millions) | | | January 2, 2022 | | | December 27, 2020 | | | $ | | | % |
United States | | | $75.9 | | | $74.3 | | | $1.6 | | | 2.2% |
International | | | 10.6 | | | 6.8 | | | 3.8 | | | 55.9% |
Total depreciation and amortization | | | $86.5 | | | $81.1 | | | $5.4 | | | 6.7% |
| | Fiscal Years Ended | | | Change | |||||||
(Dollars in millions except per share amounts) | | | December 27, 2020 | | | December 29, 2019 | | | $ | | | % |
Revenues: | | | | | | | | | ||||
Service revenues | | | $1,233.1 | | | $1,303.8 | | | $(70.7) | | | (5.4)% |
Vehicle sales | | | 151.8 | | | 133.0 | | | 18.8 | | | 14.1 % |
Total revenues | | | 1,384.9 | | | 1,436.8 | | | (51.9) | | | (3.6)% |
Cost of services and vehicle sales*: | | | | | | | | | ||||
Cost of services* | | | 721.7 | | | 780.1 | | | (58.4) | | | (7.5)% |
Cost of vehicle sales* | | | 125.2 | | | 108.1 | | | 17.1 | | | 15.8 % |
Total cost of services and vehicle sales* | | | 846.9 | | | 888.2 | | | (41.3) | | | (4.6)% |
Gross profit* | | | 538.0 | | | 548.6 | | | (10.6) | | | (1.9)% |
Selling, general and administrative | | | 144.9 | | | 142.4 | | | 2.5 | | | 1.8 % |
Depreciation and amortization | | | 81.1 | | | 88.4 | | | (7.3) | | | (8.3)% |
Operating profit | | | 312.0 | | | 317.8 | | | (5.8) | | | (1.8)% |
Interest expense | | | 56.0 | | | 55.7 | | | 0.3 | | | 0.5 % |
Other income, net | | | (1.0) | | | (0.1) | | | (0.9) | | | NM** |
Income before income taxes | | | 257.0 | | | 262.2 | | | (5.2) | | | (2.0)% |
Income taxes | | | 62.2 | | | 69.0 | | | (6.8) | | | (9.9)% |
Net income | | | $194.8 | | | $193.2 | | | $1.6 | | | 0.8% |
Net income per share | | | | | | | | | ||||
Basic | | | $1.45 | | | $1.45 | | | $— | | | —% |
Diluted | | | $1.44 | | | $1.44 | | | $— | | | —% |
* | Exclusive of depreciation and amortization |
** | NM - Not meaningful |
| | Fiscal Years Ended | | | Change | |||||||
(Dollars in millions) | | | December 27, 2020 | | | December 29, 2019 | | | $ | | | % |
United States | | | $1,134.4 | | | $1,196.2 | | | $(61.8) | | | (5.2)% |
International | | | 98.7 | | | 107.6 | | | (8.9) | | | (8.3)% |
Total service revenues | | | $1,233.1 | | | $1,303.8 | | | $(70.7) | | | (5.4)% |
| | Fiscal Years Ended | | | Change | |||||||
(Dollars in millions) | | | December 27, 2020 | | | December 29, 2019 | | | $ | | | % |
United States | | | $80.7 | | | $69.9 | | | $10.8 | | | 15.5 % |
International | | | 71.1 | | | 63.1 | | | 8.0 | | | 12.7 % |
Total vehicle sales | | | $151.8 | | | $133.0 | | | $18.8 | | | 14.1 % |
| | Fiscal Years Ended | | | Change | |||||||
(Dollars in millions) | | | December 27, 2020 | | | December 29, 2019 | | | $ | | | % |
United States | | | $659.8 | | | $714.4 | | | $(54.6) | | | (7.6)% |
International | | | 61.9 | | | 65.7 | | | (3.8) | | | (5.8)% |
Total cost of services | | | $721.7 | | | $780.1 | | | $(58.4) | | | (7.5)% |
| | Fiscal Years Ended | | | Change | |||||||
(Dollars in millions) | | | December 27, 2020 | | | December 29, 2019 | | | $ | | | % |
United States | | | $64.6 | | | $54.0 | | | $10.6 | | | 19.6% |
International | | | 60.6 | | | 54.1 | | | 6.5 | | | 12.0% |
Total cost of vehicle sales | | | $125.2 | | | $108.1 | | | $17.1 | | | 15.8% |
| | Fiscal Years Ended | | | Change | |||||||
(Dollars in millions) | | | December 27, 2020 | | | December 29, 2019 | | | $ | | | % |
United States | | | $135.0 | | | $131.3 | | | $3.7 | | | 2.8% |
International | | | 9.9 | | | 11.1 | | | (1.2) | | | (10.8)% |
Total selling, general and administrative expenses | | | $144.9 | | | $142.4 | | | $2.5 | | | 1.8% |
| | Fiscal Years Ended | | | Change | |||||||
(Dollars in millions) | | | December 27, 2020 | | | December 29, 2019 | | | $ | | | % |
United States | | | $74.3 | | | $81.8 | | | $(7.5) | | | (9.2)% |
International | | | 6.8 | | | 6.6 | | | 0.2 | | | 3.0% |
Total depreciation and amortization | | | $81.1 | | | $88.4 | | | $(7.3) | | | (8.3)% |
| | Fiscal Years Ended | |||||||
(Dollars in millions) | | | January 2, 2022 | | | December 27, 2020 | | | Change |
Net cash provided by (used by): | | | | | | | |||
Operating activities | | | $311.1 | | | $310.0 | | | $1.1 |
Investing activities | | | (393.9) | | | (69.0) | | | (324.9) |
Financing activities | | | 12.2 | | | (56.3) | | | 68.5 |
Effect of exchange rate on cash and restricted cash | | | 0.2 | | | 1.0 | | | (0.8) |
Net (decrease) increase in cash, cash equivalents and restricted cash | | | $(70.4) | | | $185.7 | | | $(256.1) |
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• | observed a selection of U.S. auction sites to gain an understanding of the revenue related activities, including the use of the IT system. |
• | evaluated the Company’s revenue recognition policies by examining the Company’s applicable published terms and conditions as they relate to U.S. buyer service fees. |
• | analyzed a selection of customer contracts to understand the contractual terms and conditions as they relate to U.S. seller service fees. |
• | selected a sample of both U.S. buyer and seller service revenue transactions and compared the amounts recognized for consistency with underlying documentation. |
| | Fiscal Years Ended | |||||||
| | January 2, 2022 | | | December 27, 2020 | | | December 29, 2019 | |
Revenues: | | | | | | | |||
Service revenues | | | $1,537.7 | | | $1,233.1 | | | $1,303.8 |
Vehicle sales | | | 299.7 | | | 151.8 | | | 133.0 |
Total revenues | | | 1,837.4 | | | 1,384.9 | | | 1,436.8 |
Operating expenses: | | | | | | | |||
Cost of services | | | 851.5 | | | 721.7 | | | 780.1 |
Cost of vehicle sales | | | 261.2 | | | 125.2 | | | 108.1 |
Selling, general and administrative | | | 192.3 | | | 144.9 | | | 142.4 |
Depreciation and amortization | | | 86.5 | | | 81.1 | | | 88.4 |
Total operating expenses | | | 1,391.5 | | | 1,072.9 | | | 1,119.0 |
Operating profit | | | 445.9 | | | 312.0 | | | 317.8 |
Interest expense, net | | | 57.7 | | | 56.0 | | | 55.7 |
Other expense (income), net | | | 0.2 | | | (1.0) | | | (0.1) |
Income before income taxes | | | 388.0 | | | 257.0 | | | 262.2 |
Income taxes | | | 93.6 | | | 62.2 | | | 69.0 |
Net income | | | $294.4 | | | $194.8 | | | $193.2 |
Net income per share: | | | | | | | |||
Basic | | | $2.18 | | | $1.45 | | | $1.45 |
Diluted | | | $2.18 | | | $1.44 | | | $1.44 |
| | Fiscal Years Ended | |||||||
| | January 2, 2022 | | | December 27, 2020 | | | December 29, 2019 | |
Net income | | | $294.4 | | | $194.8 | | | $193.2 |
Other comprehensive (loss) income | | | | | | | |||
Foreign currency translation (loss) gain | | | (2.8) | | | 3.3 | | | (1.9) |
Comprehensive income | | | $291.6 | | | $198.1 | | | $191.3 |
| | January 2, 2022 | | | December 27, 2020 | |
Assets | | | | | ||
Current assets | | | | | ||
Cash and cash equivalents | | | $109.4 | | | $232.8 |
Restricted cash | | | 53.0 | | | — |
Accounts receivable, net | | | 465.7 | | | 374.8 |
Prepaid consigned vehicle charges | | | 72.2 | | | 53.3 |
Other current assets | | | 69.6 | | | 31.1 |
Total current assets | | | 769.9 | | | 692.0 |
Non-current assets | | | | | ||
Operating lease right-of-use assets, net | | | 1,024.4 | | | 866.8 |
Property and equipment, net | | | 338.1 | | | 259.8 |
Goodwill | | | 797.5 | | | 542.3 |
Intangible assets, net | | | 197.5 | | | 150.6 |
Other assets | | | 26.9 | | | 17.4 |
Total non-current assets | | | 2,384.4 | | | 1,836.9 |
Total assets | | | $3,154.3 | | | $2,528.9 |
Liabilities and Stockholders’ Equity | | | | | ||
Current liabilities | | | | | ||
Accounts payable | | | $163.5 | | | $122.6 |
Short-term right-of-use operating lease liability | | | 94.3 | | | 78.1 |
Accrued employee benefits and compensation expenses | | | 44.2 | | | 23.4 |
Other accrued expenses | | | 124.6 | | | 54.4 |
Current maturities of long-term debt | | | 181.3 | | | 4.0 |
Total current liabilities | | | 607.9 | | | 282.5 |
Non-current liabilities | | | | | ||
Long-term debt | | | 1,120.6 | | | 1,248.0 |
Long-term right-of-use operating lease liability | | | 984.8 | | | 836.6 |
Deferred income tax liabilities | | | 74.8 | | | 65.7 |
Other liabilities | | | 32.6 | | | 26.7 |
Total non-current liabilities | | | 2,212.8 | | | 2,177.0 |
Commitments and contingencies (Note 14) | | | | | ||
Stockholders’ equity | | | | | ||
Preferred stock, $0.01 par value: Authorized 150.0 shares; issued and outstanding: none | | | — | | | — |
Common stock, $0.01 par value: Authorized 750.0 shares; issued and outstanding: 134.2 shares at January 2, 2022 and 134.5 shares at December 27, 2020 | | | 1.3 | | | 1.3 |
Treasury stock, at cost: 0.7 shares at January 2, 2022 and 0.0 shares at December 27, 2020 | | | (34.0) | | | — |
Additional paid-in capital | | | 18.6 | | | 12.0 |
Retained earnings | | | 362.1 | | | 67.7 |
Accumulated other comprehensive loss | | | (14.4) | | | (11.6) |
Total stockholders' equity | | | 333.6 | | | 69.4 |
Total liabilities and stockholders' equity | | | $3,154.3 | | | $2,528.9 |
| | Common Stock | | | Treasury Stock | | | Additional Paid-In Capital | | | Retained Earnings (Deficit) | | | Net Parent Investment | | | Accumulated Other Comprehensive (Loss) Income | | | Total Stockholders’ Equity (Deficit) | |||||||
| | Shares | | | Amt | | | Shares | | | Amt | | |||||||||||||||
Balance at December 30, 2018 | | | — | | | $— | | | — | | | $— | | | $— | | | $— | | | $576.2 | | | $(13.0) | | | $563.2 |
Net income | | | — | | | — | | | — | | | — | | | — | | | 87.4 | | | 105.8 | | | — | | | 193.2 |
Cumulative effect adjustment for adoption of ASC Topic 842, net of tax | | | — | | | — | | | — | | | — | | | — | | | — | | | 1.1 | | | — | | | 1.1 |
Foreign currency translation adjustments, net of tax | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (1.9) | | | (1.9) |
Stock-based compensation expense | | | — | | | — | | | — | | | — | | | 2.8 | | | — | | | 1.9 | | | — | | | 4.7 |
Exercise of stock options | | | 0.2 | | | — | | | — | | | — | | | 1.6 | | | — | | | — | | | — | | | 1.6 |
Withholding taxes on stock-based awards | | | — | | | — | | | — | | | — | | | (0.9) | | | — | | | — | | | — | | | (0.9) |
Reclassification of net parent investment to common stock and additional paid-in capital | | | 133.4 | | | 1.3 | | | — | | | — | | | — | | | (214.5) | | | 213.2 | | | — | | | — |
Dividend paid to KAR | | | — | | | — | | | — | | | — | | | — | | | — | | | (1,278) | | | — | | | (1,278.0) |
Net transfer to parent and affiliates | | | — | | | — | | | — | | | — | | | — | | | — | | | 379.8 | | | — | | | 379.8 |
Balance at December 29, 2019 | | | 133.6 | | | 1.3 | | | — | | | — | | | 3.5 | | | (127.1) | | | — | | | (14.9) | | | (137.2) |
Net income | | | — | | | — | | | — | | | — | | | — | | | 194.8 | | | — | | | — | | | 194.8 |
Foreign currency translation adjustments, net of tax | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 3.3 | | | 3.3 |
Stock-based compensation expense | | | — | | | — | | | — | | | — | | | 8.5 | | | — | | | — | | | — | | | 8.5 |
Common stock issued for exercise and vesting of stock-based awards | | | 1.1 | | | — | | | — | | | — | | | 8.1 | | | — | | | — | | | — | | | 8.1 |
Common stock issued for employee stock purchase plan | | | — | | | — | | | — | | | — | | | 1.0 | | | — | | | — | | | — | | | 1.0 |
Withholding taxes on stock-based awards | | | (0.2) | | | — | | | — | | | — | | | (9.1) | | | — | | | — | | | — | | | (9.1) |
Balance at December 27, 2020 | | | 134.5 | | | 1.3 | | | — | | | — | | | 12.0 | | | 67.7 | | | — | | | (11.6) | | | 69.4 |
Net income | | | — | | | — | | | — | | | — | | | — | | | 294.4 | | | — | | | — | | | 294.4 |
Foreign currency translation adjustments, net of tax | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (2.8) | | | (2.8) |
Purchase of treasury stock | | | (0.7) | | | — | | | 0.7 | | | (34.0) | | | — | | | — | | | — | | | — | | | (34.0) |
Stock-based compensation expense | | | — | | | — | | | — | | | — | | | 11.4 | | | — | | | — | | | — | | | 11.4 |
Common stock issued for exercise and vesting of stock-based awards | | | — | | | — | | | — | | | — | | | 1.0 | | | — | | | — | | | — | | | 1.0 |
Common stock issued for employee stock purchase plan | | | 0.5 | | | — | | | — | | | — | | | 1.6 | | | — | | | — | | | — | | | 1.6 |
Withholding taxes on stock-based awards | | | (0.1) | | | — | | | — | | | — | | | (7.4) | | | — | | | — | | | — | | | (7.4) |
Balance at January 2, 2022 | | | 134.2 | | | $1.3 | | | 0.7 | | | $(34.0) | | | $18.6 | | | $362.1 | | | $— | | | $(14.4) | | | $333.6 |
| | Fiscal Years Ended | |||||||
| | January 2, 2022 | | | December 27, 2020 | | | December 29, 2019 | |
Operating activities | | | | | | | |||
Net income | | | $294.4 | | | $194.8 | | | $193.2 |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | |||
Depreciation and amortization | | | 86.5 | | | 81.1 | | | 88.4 |
Operating lease expense | | | 153.9 | | | 136.7 | | | 118.3 |
Provision for credit losses | | | 1.4 | | | 4.4 | | | 1.8 |
Deferred income taxes | | | (0.7) | | | 2.0 | | | 0.6 |
Loss on extinguishment of debt | | | 10.3 | | | — | | | — |
Amortization of debt issuance costs | | | 3.4 | | | 4.2 | | | 2.0 |
Stock-based compensation | | | 11.4 | | | 8.5 | | | 4.7 |
Change in contingent consideration liabilities | | | 2.3 | | | — | | | — |
Other non-cash, net | | | 0.2 | | | (0.7) | | | (0.1) |
Changes in operating assets and liabilities, net of acquisitions: | | | | | | | |||
Operating lease payments | | | (147.0) | | | (130.9) | | | (119.3) |
Accounts receivable and other assets | | | (134.4) | | | (54.3) | | | (23.0) |
Accounts payable and accrued expenses | | | 29.4 | | | 64.2 | | | 4.6 |
Net cash provided by operating activities | | | 311.1 | | | 310.0 | | | 271.2 |
Investing activities | | | | | | | |||
Acquisition of businesses (net of cash acquired) | | | (257.1) | | | — | | | (16.7) |
Purchases of property, equipment and computer software | | | (135.6) | | | (69.8) | | | (68.5) |
Proceeds from the sale of property and equipment | | | 0.8 | | | 0.8 | | | 0.3 |
Other | | | (2.0) | | | — | | | — |
Net cash used by investing activities | | | (393.9) | | | (69.0) | | | (84.9) |
Financing activities | | | | | | ||||
Net increase (decrease) in book overdrafts | | | 28.8 | | | (33.6) | | | (26.8) |
Proceeds from debt issuance | | | 815.0 | | | — | | | 1,305.5 |
Payments on long-term debt | | | (774.0) | | | (4.0) | | | (27.5) |
Dividend paid to KAR | | | — | | | — | | | (1,278.0) |
Net cash transfers to Parent and affiliates | | | — | | | — | | | (117.8) |
Deferred financing costs | | | (4.8) | | | (2.9) | | | (25.2) |
Payments on finance leases | | | (12.7) | | | (14.3) | | | (13.7) |
Purchase of treasury stock | | | (34.0) | | | — | | | — |
Issuance of common stock under stock plans | | | 1.0 | | | 8.1 | | | 1.6 |
Proceeds from issuance of employee stock purchase plan shares | | | 1.6 | | | 1.0 | | | — |
Tax withholding payments for vested RSUs | | | (7.4) | | | (9.1) | | | (0.9) |
Payment of contingent consideration | | | (1.3) | | | (1.5) | | | — |
Net cash provided (used) by financing activities | | | 12.2 | | | (56.3) | | | (182.8) |
Effect of exchange rate changes on cash and restricted cash | | | 0.2 | | | 1.0 | | | (4.7) |
Net (decrease) increase in cash, cash equivalents and restricted cash | | | (70.4) | | | 185.7 | | | (1.2) |
Cash, cash equivalents and restricted cash at beginning of period | | | 232.8 | | | 47.1 | | | 48.3 |
Cash, cash equivalents and restricted cash at end of period | | | $162.4 | | | $232.8 | | | $47.1 |
Cash paid for interest, net | | | $45.2 | | | $53.7 | | | $29.8 |
Cash paid for taxes, net | | | $90.0 | | | $59.7 | | | $71.8 |
Reconciliation of cash, cash equivalents and restricted cash reported in balance sheets | | | | ||||||
Cash and cash equivalents | | | $109.4 | | | $232.8 | | | $47.1 |
Restricted cash | | | 53.0 | | | — | | | — |
Total cash, cash equivalents and restricted cash shown in the statements of cash flows | | | $162.4 | | | $232.8 | | | $47.1 |
• | Level 1: Inputs that are based upon quoted prices in active markets for identical assets or liabilities. |
• | Level 2: Inputs, other than quoted prices included within Level 1, which are observable either directly or indirectly. |
• | Level 3: Unobservable inputs where there is little or no market activity for the asset or liability. These inputs reflect management’s best estimate of what market participants would use to price the assets or liabilities at the measurement date. |
| | Fair Value | |
Cash | | | $260.2 |
Fair value of contingent consideration* | | | 51.4 |
Total fair value of consideration transferred | | | $311.6 |
* | Recorded in Other accrued expenses line within the Consolidated Balance Sheets. |
| | Fair Value | |
Cash | | | $7.1 |
Accounts receivable | | | 4.7 |
Inventory | | | 17.4 |
ROU assets | | | 39.0 |
Property and equipment | | | 12.3 |
Goodwill | | | 256.6 |
Intangible assets | | | 40.9 |
Other assets | | | 1.4 |
Accounts payable and other accrued expenses | | | (17.6) |
Operating lease liabilities | | | (39.0) |
Other long-term liabilities | | | (11.2) |
Net assets acquired | | | $311.6 |
| | Fiscal Year Ended | ||||
| | January 2, 2022 | | | December 27, 2020 | |
Net revenue | | | $2,011.1 | | | $1,575.4 |
Net income | | | 297.9 | | | 179.3 |
• | For each award recipient, the intent was to maintain the economic value of those awards before and after the Separation Date; and |
• | The terms of the equity awards, such as the vesting schedule, will generally continue unchanged, except that the performance criteria for certain performance-based restricted stock units (“PRSUs”) granted in 2019 were subject to adjusted performance criteria. Such PRSUs were converted into time-based restricted stock units (“RSUs”) with two-year cliff vesting in February 2020, since the adjusted performance criteria were determined to have been met. |
| | Fiscal Years Ended | |||||||
| | January 2, 2022 | | | December 27, 2020 | | | December 29, 2019 | |
Performance-based Restricted Stock Units | | | $3.3 | | | $1.4 | | | $0.4 |
Restricted Stock Units and Awards | | | 7.3 | | | 6.3 | | | 3.9 |
Stock Options | | | 0.8 | | | 0.8 | | | 0.4 |
Total stock-based compensation expense | | | $11.4 | | | $8.5 | | | $4.7 |
Performance-based Restricted Stock Units | | | Awards | | | Weighted Average Grant Date Fair Value |
Outstanding at December 27, 2020 | | | 98,871 | | | $49.65 |
Granted | | | 79,181 | | | 62.18 |
Forfeited | | | (9,589) | | | 56.86 |
Outstanding at January 2, 2022 | | | 168,463 | | | 55.13 |
Restricted Stock Units* | | | Awards | | | Weighted Average Grant Date Fair Value |
Outstanding at December 27, 2020 | | | 771,711 | | | $33.68 |
Granted | | | 134,589 | | | 62.77 |
Vested | | | (378,171) | | | 34.20 |
Forfeited | | | (31,558) | | | 43.88 |
Outstanding at January 2, 2022 | | | 496,571 | | | 40.46 |
* | IAA awards, including those held by KAR employees |
Restricted Stock Awards | | | Awards | | | Weighted Average Grant Date Fair Value |
Outstanding at December 27, 2020 | | | 8,694 | | | $42.99 |
Granted | | | 17,609 | | | 53.88 |
Vested | | | (8,694) | | | 42.99 |
Outstanding at January 2, 2022 | | | 17,609 | | | 53.88 |
Stock Options* | | | Number of Awards | | | Weighted Average Exercise Price | | | Weighted Average Remaining Contractual Term (in Years) | | | Average Intrinsic Value (in millions) |
Outstanding at December 27, 2020 | | | 365,376 | | | $30.80 | | | | | ||
Exercised | | | (78,978) | | | 12.97 | | | | | ||
Canceled/Expired | | | (6,166) | | | 34.28 | | | | | ||
Outstanding at January 2, 2022 | | | 280,232 | | | 35.63 | | | 5.4 | | | $4.2 |
Exercisable at January 2, 2022 | | | 221,214 | | | 32.60 | | | 4.9 | | | $4.0 |
* | IAA awards, including those held by KAR employees. |
Stock Options | | | Number of Awards | | | Weighted Average Grant-Date Fair Value |
Outstanding at December 27, 2020 | | | 126,164 | | | $46.97 |
Vested | | | (67,146) | | | 46.97 |
Outstanding at January 2, 2022 | | | 59,018 | | | 46.97 |
| | Fiscal Years Ended | |||||||
| | January 2, 2022 | | | December 27, 2020 | | | December 29, 2019 | |
Net income | | | $294.4 | | | $194.8 | | | $193.2 |
| | | | | | ||||
Weighted average common shares outstanding: | | | | | | | |||
Basic | | | 134.7 | | | 134.1 | | | 133.4 |
Effect of dilutive stock options and restricted stock awards | | | 0.6 | | | 1.0 | | | 1.0 |
Diluted | | | 135.3 | | | 135.1 | | | 134.4 |
| | | | | | ||||
Net income per share: | | | | | | | |||
Basic | | | $2.18 | | | $1.45 | | | $1.45 |
Diluted | | | $2.18 | | | $1.44 | | | $1.44 |
| | Fiscal Years Ended | |||||||
| | January 2, 2022 | | | December 27, 2020 | | | December 29, 2019 | |
Anti-dilutive awards | | | — | | | 0.2 | | | 0.2 |
Awards subject to performance conditions not fully satisfied | | | 0.2 | | | 0.1 | | | — |
| | 0.2 | | | 0.3 | | | 0.2 |
| | Fiscal Years Ended | ||||
| | January 2, 2022 | | | December 27, 2020 | |
Advance charges receivable | | | $322.7 | | | $239.5 |
Trade accounts receivable | | | 139.8 | | | 126.5 |
Other receivable | | | 12.3 | | | 16.8 |
Accounts receivable, gross | | | 474.8 | | | 382.8 |
Less: Allowance for credit losses | | | (9.1) | | | (8.0) |
Accounts receivable, net | | | $465.7 | | | $374.8 |
| | Fiscal Years Ended | |||||||
| | January 2, 2022 | | | December 27, 2020 | | | December 29, 2019 | |
Allowance for Credit Losses | | | | | | | |||
Balance at beginning of period | | | $8.0 | | | $4.2 | | | $3.3 |
Provision for credit losses | | | 1.4 | | | 4.4 | | | 1.8 |
Less net charge-offs | | | (0.3) | | | (0.6) | | | (0.9) |
Balance at end of period | | | $9.1 | | | $8.0 | | | $4.2 |
| | United States | | | International | | | Total | |
Balance at December 29, 2019 | | | $496.0 | | | $45.3 | | | $541.3 |
Currency translation adjustments | | | — | | | 1.0 | | | 1.0 |
Balance at December 27, 2020 | | | $496.0 | | | $46.3 | | | $542.3 |
Increase for acquisition activity (Note 4) | | | 2.6 | | | 256.6 | | | 259.2 |
Currency translation adjustments | | | — | | | (4.0) | | | (4.0) |
Balance at January 2, 2022 | | | $498.6 | | | $298.9 | | | $797.5 |
| | January 2, 2022 | | | December 27, 2020 | |||||||||||||
| | Gross Carrying Amount | | | Accumulated Amortization | | | Carrying Value | | | Gross Carrying Amount | | | Accumulated Amortization | | | Carrying Value | |
Customer relationships | | | $376.3 | | | $(341.5) | | | $34.8 | | | $371.7 | | | $(329.1) | | | $42.6 |
Tradenames | | | 69.1 | | | (2.2) | | | 66.9 | | | 58.6 | | | (1.8) | | | 56.8 |
Computer software & technology | | | 301.7 | | | (205.9) | | | 95.8 | | | 224.6 | | | (173.4) | | | 51.2 |
Total | | | $747.1 | | | $(549.6) | | | $197.5 | | | $654.9 | | | $(504.3) | | | $150.6 |
| | Amount | |
Fiscal year 2022 | | | $55.7 |
Fiscal year 2023 | | | 44.0 |
Fiscal year 2024 | | | 24.2 |
Fiscal year 2025 | | | 10.6 |
Fiscal year 2026 | | | 3.3 |
Thereafter | | | 3.7 |
Total | | | $141.5 |
| | Useful Lives (in years) | | | January 2, 2022 | | | December 27, 2020 | |
Land | | | | | $168.4 | | | $114.3 | |
Building and leasehold improvements | | | 1 - 30 | | | 328.2 | | | 309.3 |
Furniture, fixtures, equipment and vehicles | | | 3 - 5 | | | 349.5 | | | 305.0 |
Construction in progress | | | | | 23.9 | | | 13.1 | |
| | | | 870.0 | | | 741.7 | ||
Accumulated depreciation | | | | | (531.9) | | | (481.9) | |
Property and equipment, net | | | | | $338.1 | | | $259.8 |
| | January 2, 2022 | | | December 27, 2020 | |
2021 Term Loan Facility | | | 650.0 | | | $— |
2021 Revolving Credit Facility | | | 165.0 | | | — |
2019 Term Loan Facility | | | — | | | 774.0 |
Notes | | | 500.0 | | | 500.0 |
Total debt | | | 1,315.0 | | | 1,274.0 |
Unamortized debt issuance costs | | | (13.1) | | | (22.0) |
Current portion of long-term debt | | | (181.3) | | | (4.0) |
Long-term debt | | | $1,120.6 | | | $1,248.0 |
| | Amount | |
Fiscal year 2022 | | | $181.3 |
Fiscal year 2023 | | | 32.5 |
Fiscal year 2024 | | | 28.4 |
Fiscal year 2025 | | | 48.7 |
Fiscal year 2026 | | | 524.1 |
Thereafter | | | 500.0 |
Total | | | $1,315.0 |
| | Fiscal Years Ended | |||||||
| | January 2, 2022 | | | December 27, 2020 | | | December 29, 2019 | |
Operating lease cost | | | $153.9 | | | $136.7 | | | $118.3 |
Finance lease cost: | | | | | | | |||
Amortization of right-of-use assets | | | 12.3 | | | 14.5 | | | 12.4 |
Interest on lease liabilities | | | 0.8 | | | 0.9 | | | 0.8 |
Short-term lease cost | | | 6.9 | | | 4.7 | | | 5.3 |
Total lease cost | | | $173.9 | | | $156.8 | | | $136.8 |
| | Fiscal Years Ended | |||||||
| | January 2, 2022 | | | December 27, 2020 | | | December 29, 2019 | |
Cash paid for amounts included in measurement of lease liabilities: | | | | | | | |||
Operating cash flows related to operating leases | | | $147.0 | | | $130.9 | | | $119.3 |
Operating cash flows related to finance leases | | | $0.8 | | | $1.0 | | | $1.0 |
Financing cash flows related to finance leases | | | $12.7 | | | $14.3 | | | $13.7 |
Right-of-use assets obtained in exchange for lease obligations: | | | | | | | |||
Operating leases | | | $256.6 | | | $219.7 | | | $204.7 |
Finance leases | | | $17.6 | | | $18.1 | | | $11.6 |
| | January 2, 2022 | | | December 29, 2019 | |
Operating Leases | | | | | ||
Operating lease right-of-use assets | | | $1,262.7 | | | $1,030.7 |
Accumulated amortization | | | (238.3) | | | (163.9) |
Operating lease right-of-use assets, net | | | $1,024.4 | | | $866.8 |
Other accrued expenses | | | $94.3 | | | $78.1 |
Operating lease liabilities | | | 984.8 | | | 836.6 |
Total operating lease liabilities | | | $1,079.1 | | | $914.7 |
Finance Leases | | | | | ||
Property and equipment, gross | | | $157.6 | | | $144.2 |
Accumulated depreciation | | | (120.6) | | | (108.9) |
Property and equipment, net | | | $37.0 | | | $35.3 |
Other accrued expenses | | | $10.9 | | | $11.1 |
Other liabilities | | | 23.5 | | | 17.2 |
Total finance lease liabilities | | | $34.4 | | | $28.3 |
Weighted Average Remaining Lease Term (Years) | | | | | ||
Operating leases | | | 11.89 | | | 11.67 |
Finance leases | | | 3.52 | | | 3.27 |
Weighted Average Discount Rate | | | | | ||
Operating leases | | | 5.4% | | | 5.6% |
Finance leases | | | 2.5% | | | 3.3% |
| | Operating Leases | | | Finance Leases | |
2022 | | | $148.5 | | | $11.5 |
2023 | | | 138.2 | | | 9.7 |
2024 | | | 128.6 | | | 8.4 |
2025 | | | 119.3 | | | 4.2 |
2026 | | | 114.1 | | | 2.1 |
Thereafter | | | 837.1 | | | — |
| | $1,485.8 | | | $35.9 | |
Less: imputed interest | | | 406.7 | | | 1.5 |
Total | | | $1,079.1 | | | $34.4 |
| | Fiscal Years Ended | |||||||
| | January 2, 2022 | | | December 27, 2020 | | | December 29, 2019 | |
Income before income taxes: | | | | | | | |||
Domestic | | | $364.4 | | | $233.9 | | | $229.1 |
Foreign | | | 23.6 | | | 23.1 | | | 33.1 |
Total | | | $388.0 | | | $257.0 | | | $262.2 |
Income tax expense (benefit): | | | | | | | |||
Current: | | | | | | | |||
Federal | | | $73.2 | | | $45.0 | | | $46.4 |
Foreign | | | 6.1 | | | 5.1 | | | 10.1 |
State | | | 15.0 | | | 10.1 | | | 11.9 |
Total current provision | | | 94.3 | | | 60.2 | | | 68.4 |
Deferred: | | | | | | | |||
Federal | | | 0.2 | | | 2.1 | | | 1.5 |
Foreign | | | (0.1) | | | 0.2 | | | (0.8) |
State | | | (0.8) | | | (0.3) | | | (0.1) |
Total deferred (benefit) provision | | | (0.7) | | | 2.0 | | | 0.6 |
Income tax expense | | | $93.6 | | | $62.2 | | | $69.0 |
| | Fiscal Years Ended | |||||||
| | January 2, 2022 | | | December 27, 2020 | | | December 29, 2019 | |
Statutory rate | | | 21.0% | | | 21.0% | | | 21.0% |
State and local income taxes, net | | | 3.0% | | | 3.2% | | | 3.3% |
Reserves for tax exposures | | | 0.4% | | | 0.2% | | | 0.2% |
International operations | | | —% | | | 0.5% | | | 1.1% |
Non deductible executive compensation | | | 0.3% | | | 0.1% | | | 0.1% |
Stock-based compensation | | | (0.1)% | | | (0.2)% | | | (0.2)% |
Impact of law and rate change | | | (0.2)% | | | —% | | | 0.1% |
Other, net | | | (0.3)% | | | (0.6)% | | | 0.7% |
Effective rate | | | 24.1% | | | 24.2% | | | 26.3% |
| | January 2, 2022 | | | December 27, 2020 | |
Gross deferred tax assets: | | | | | ||
Right-of-use liabilities | | | $271.5 | | | $229.8 |
Allowances for accounts receivable | | | 2.0 | | | 1.8 |
Accruals and liabilities | | | 10.0 | | | 3.9 |
Employee benefits and compensation | | | 4.6 | | | 4.4 |
Losses carried forward | | | 0.1 | | | — |
Other | | | 3.9 | | | 2.6 |
Total gross deferred tax assets | | | 292.1 | | | 242.5 |
Deferred tax asset valuation allowance | | | (0.1) | | | — |
Net deferred tax assets | | | 292.0 | | | 242.5 |
Gross deferred tax liabilities: | | | | | ||
Right-of-use assets | | | (256.7) | | | (216.6) |
Property and equipment | | | (22.4) | | | (14.6) |
Goodwill and intangible assets | | | (72.9) | | | (64.8) |
Other | | | (14.8) | | | (12.2) |
Total | | | (366.8) | | | (308.2) |
Net deferred tax liabilities | | | $(74.8) | | | $(65.7) |
| | January 2, 2022 | | | December 27, 2020 | |
Balance at beginning of period | | | $4.1 | | | $3.5 |
Increase in prior year tax positions | | | 0.6 | | | 0.1 |
Increase in current year tax positions | | | 1.9 | | | 1.2 |
Lapse in statute of limitations | | | (0.6) | | | (0.7) |
Balance at end of period | | | $6.0 | | | $4.1 |
| | United States | | | International | | | Consolidated | |
Revenues: | | | | | | | |||
Service revenues | | | $1,429.2 | | | $108.5 | | | $1,537.7 |
Vehicle sales | | | 134.1 | | | 165.6 | | | 299.7 |
Total revenues | | | 1,563.3 | | | 274.1 | | | 1,837.4 |
Operating expenses: | | | | | | | |||
Cost of services | | | 776.3 | | | 75.2 | | | 851.5 |
Cost of vehicle sales | | | 118.1 | | | 143.1 | | | 261.2 |
Selling, general and administrative | | | 178.6 | | | 13.7 | | | 192.3 |
Depreciation and amortization | | | 75.9 | | | 10.6 | | | 86.5 |
Total operating expenses | | | 1,148.9 | | | 242.6 | | | 1,391.5 |
Operating profit | | | 414.4 | | | 31.5 | | | 445.9 |
Interest expense, net | | | 58.0 | | | (0.3) | | | 57.7 |
Other expense (income), net | | | 0.5 | | | (0.3) | | | 0.2 |
Intercompany (income) expense | | | (8.5) | | | 8.5 | | | — |
Income before income taxes | | | 364.4 | | | 23.6 | | | 388.0 |
Income taxes | | | 87.6 | | | 6.0 | | | 93.6 |
Net income | | | $276.8 | | | $17.6 | | | $294.4 |
Total assets | | | $2,510.1 | | | $644.2 | | | $3,154.3 |
Capital expenditures | | | $124.9 | | | $10.7 | | | $135.6 |
| | United States | | | International | | | Consolidated | |
Revenues: | | | | | | | |||
Service revenues | | | $1,134.4 | | | $98.7 | | | $1,233.1 |
Vehicle sales | | | 80.7 | | | 71.1 | | | 151.8 |
Total revenues | | | 1,215.1 | | | 169.8 | | | 1,384.9 |
Operating expenses: | | | | | | | |||
Cost of services | | | 659.8 | | | 61.9 | | | 721.7 |
Cost of vehicle sales | | | 64.6 | | | 60.6 | | | 125.2 |
Selling, general and administrative | | | 135.0 | | | 9.9 | | | 144.9 |
Depreciation and amortization | | | 74.3 | | | 6.8 | | | 81.1 |
Total operating expenses | | | 933.7 | | | 139.2 | | | 1,072.9 |
Operating profit | | | 281.4 | | | 30.6 | | | 312.0 |
Interest expense, net | | | 56.2 | | | (0.2) | | | 56.0 |
Other income, net | | | (0.7) | | | (0.3) | | | (1.0) |
Intercompany (income) expense | | | (8.0) | | | 8.0 | | | — |
Income before income taxes | | | 233.9 | | | 23.1 | | | 257.0 |
Income taxes | | | 56.9 | | | 5.3 | | | 62.2 |
Net income | | | $177.0 | | | $17.8 | | | $194.8 |
Total assets | | | $2,341.1 | | | $187.8 | | | $2,528.9 |
Capital expenditures | | | $52.3 | | | $17.5 | | | $69.8 |
| | United States | | | International | | | Consolidated | |
Revenues: | | | | | | | |||
Service revenues | | | $1,196.2 | | | $107.6 | | | $1,303.8 |
Vehicle sales | | | 69.9 | | | 63.1 | | | 133 |
Total revenues | | | 1266.1 | | | 170.7 | | | 1436.8 |
Operating expenses: | | | | | | | |||
Cost of services | | | 714.4 | | | 65.7 | | | 780.1 |
Cost of vehicle sales | | | 54.0 | | | 54.1 | | | 108.1 |
Selling, general and administrative | | | 131.3 | | | 11.1 | | | 142.4 |
Depreciation and amortization | | | 81.8 | | | 6.6 | | | 88.4 |
Total operating expenses | | | 981.5 | | | 137.5 | | | 1,119.0 |
Operating profit | | | 284.6 | | | 33.2 | | | 317.8 |
Interest expense | | | 55.7 | | | — | | | 55.7 |
Other (income) expense, net | | | (0.2) | | | 0.1 | | | (0.1) |
Income before income taxes | | | 229.1 | | | 33.1 | | | 262.2 |
Income taxes | | | 59.7 | | | 9.3 | | | 69.0 |
Net income | | | $169.4 | | | $23.8 | | | $193.2 |
Total assets | | | $1,963.4 | | | $187.8 | | | $2,151.2 |
Capital expenditures | | | $64.2 | | | $4.3 | | | $68.5 |
| | January 2, 2022 | | | December 27, 2020 | |
Long-lived assets | | | | | ||
U.S. | | | $1,205.5 | | | $1,040.8 |
Foreign | | | 157.0 | | | 85.8 |
| | $1,362.5 | | | $1,126.6 |
| | Three Months Ended | | | Change | | | Nine Months Ended | | | Change | |||||||||||||
(Dollars in millions, except per share data) | | | Oct 2, 2022 | | | Sep 26, 2021 | | | $ | | | % | | | Oct 2, 2022 | | | Sep 26, 2021 | | | $ | | | % |
Revenues: | | | | | | | | | | | | | | | | | ||||||||
Service revenues | | | $397.9 | | | $359.0 | | | $38.9 | | | 10.8% | | | $1,249.5 | | | $1,101.9 | | | $147.6 | | | 13.4% |
Vehicle and parts sales | | | 99.6 | | | 61.7 | | | 37.9 | | | 61.4% | | | 325.9 | | | 187.4 | | | 138.5 | | | 73.9% |
Total revenues | | | 497.5 | | | 420.7 | | | 76.8 | | | 18.3% | | | 1,575.4 | | | 1,289.3 | | | 286.1 | | | 22.2% |
Operating expenses: | | | | | | | | | | | | | | | | | ||||||||
Cost of services | | | 244.0 | | | 198.4 | | | 45.6 | | | 23.0% | | | 739.0 | | | 592.4 | | | 146.6 | | | 24.7% |
Cost of vehicle and parts sales | | | 93.3 | | | 54.5 | | | 38.8 | | | 71.2% | | | 293.0 | | | 160.5 | | | 132.5 | | | 82.6% |
Selling, general and administrative | | | 51.0 | | | 49.8 | | | 1.2 | | | 2.4% | | | 152.8 | | | 136.9 | | | 15.9 | | | 11.6% |
Depreciation and amortization | | | 25.2 | | | 21.2 | | | 4.0 | | | 18.9% | | | 77.9 | | | 61.5 | | | 16.4 | | | 26.7% |
Total operating expenses | | | 413.5 | | | 323.9 | | | 89.6 | | | 27.7% | | | 1,262.7 | | | 951.3 | | | 311.4 | | | 32.7% |
Operating profit | | | 84.0 | | | 96.8 | | | (12.8) | | | (13.2)% | | | 312.7 | | | 338.0 | | | (25.3) | | | (7.5)% |
Interest expense, net | | | 13.3 | | | 11.1 | | | 2.2 | | | 19.8% | | | 36.0 | | | 46.0 | | | (10.0) | | | (21.7)% |
Other expense (income), net | | | 3.0 | | | 0.2 | | | 2.8 | | | NM* | | | 8.2 | | | (0.5) | | | 8.7 | | | NM* |
Income before income taxes | | | 67.7 | | | 85.5 | | | (17.8) | | | (20.8)% | | | 268.5 | | | 292.5 | | | (24.0) | | | (8.2)% |
Income taxes | | | 17.4 | | | 19.8 | | | (2.4) | | | (12.1)% | | | 54.0 | | | 71.4 | | | (17.4) | | | (24.4)% |
Net income | | | $50.3 | | | 65.7 | | | $(15.4) | | | (23.4)% | | | $214.5 | | | 221.1 | | | $(6.6) | | | (3.0)% |
Net income per share | | | | | | | | | | | | | | | | | ||||||||
Basic | | | $0.38 | | | $0.49 | | | $(0.11) | | | (22.4)% | | | $1.60 | | | $1.64 | | | $(0.04) | | | (2.4)% |
Diluted | | | $0.38 | | | $0.49 | | | $(0.11) | | | (22.4)% | | | $1.60 | | | $1.63 | | | $(0.03) | | | (1.8)% |
| | Three Months Ended | | | Change | | | Nine Months Ended | | | Change | |||||||||||||
(Dollars in millions) | | | Oct 2, 2022 | | | Sep 26, 2021 | | | $ | | | % | | | Oct 2, 2022 | | | Sep 26, 2021 | | | $ | | | % |
United States | | | $362.8 | | | $336.5 | | | $26.3 | | | 7.8% | | | $1,140.3 | | | $1,027.9 | | | $112.4 | | | 10.9% |
International | | | 35.1 | | | 22.5 | | | 12.6 | | | 56.0% | | | 109.2 | | | 74.0 | | | 35.2 | | | 47.6% |
Total service revenues | | | $397.9 | | | $359.0 | | | $38.9 | | | 10.8% | | | $1,249.5 | | | $1,101.9 | | | $147.6 | | | 13.4% |
| | Three Months Ended | | | Change | | | Nine Months Ended | | | Change | |||||||||||||
(Dollars in millions) | | | Oct 2, 2022 | | | Sep 26, 2021 | | | $ | | | % | | | Oct 2, 2022 | | | Sep 26, 2021 | | | $ | | | % |
United States | | | $43.1 | | | $32.6 | | | $10.5 | | | 32.2% | | | $122.9 | | | $92.5 | | | $30.4 | | | 32.9% |
International | | | 56.5 | | | 29.1 | | | 27.4 | | | 94.2% | | | 203.0 | | | 94.9 | | | 108.1 | | | 113.9% |
Total vehicle and parts sales | | | $99.6 | | | $61.7 | | | $37.9 | | | 61.4% | | | $325.9 | | | $187.4 | | | $138.5 | | | 73.9% |
| | Three Months Ended | | | Change | | | Nine Months Ended | | | Change | |||||||||||||
(Dollars in millions) | | | Oct 2, 2022 | | | Sep 26, 2021 | | | $ | | | % | | | Oct 2, 2022 | | | Sep 26, 2021 | | | $ | | | % |
United States | | | $215.1 | | | $183.7 | | | $31.4 | | | 17.1% | | | $648.6 | | | $544.5 | | | $104.1 | | | 19.1% |
International | | | 28.9 | | | 14.7 | | | 14.2 | | | 96.6% | | | 90.4 | | | 47.9 | | | 42.5 | | | 88.7% |
Total cost of services | | | $244.0 | | | $198.4 | | | $45.6 | | | 23.0% | | | $739.0 | | | $592.4 | | | $146.6 | | | 24.7% |
| | Three Months Ended | | | Change | | | Nine Months Ended | | | Change | |||||||||||||
(Dollars in millions) | | | Oct 2, 2022 | | | Sep 26, 2021 | | | $ | | | % | | | Oct 2, 2022 | | | Sep 26, 2021 | | | $ | | | % |
United States | | | $41.3 | | | 29.2 | | | $12.1 | | | 41.4% | | | $117.8 | | | $76.9 | | | $40.9 | | | 53.2% |
International | | | 52.0 | | | 25.3 | | | 26.7 | | | 105.5% | | | 175.2 | | | 83.6 | | | 91.6 | | | 109.6% |
Total cost of vehicle and parts sales | | | $93.3 | | | $54.5 | | | $38.8 | | | 71.2% | | | $293.0 | | | $160.5 | | | $132.5 | | | 82.6% |
| | Three Months Ended | | | Change | | | Nine Months Ended | | | Change | |||||||||||||
(Dollars in millions) | | | Oct 2, 2022 | | | Sep 26, 2021 | | | $ | | | % | | | Oct 2, 2022 | | | Sep 26, 2021 | | | $ | | | % |
United States | | | $45.8 | | | $46.4 | | | $(0.6) | | | (1.3)% | | | $135.3 | | | $127.4 | | | $7.9 | | | 6.2% |
International | | | 5.2 | | | 3.4 | | | 1.8 | | | 52.9% | | | 17.5 | | | 9.5 | | | 8.0 | | | 84.2% |
Total selling, general and administrative expenses | | | $51.0 | | | $49.8 | | | $1.2 | | | 2.4% | | | $152.8 | | | $136.9 | | | $15.9 | | | 11.6% |
| | Three Months Ended | | | Change | | | Nine Months Ended | | | Change | |||||||||||||
(Dollars in millions) | | | Oct 2, 2022 | | | Sep 26, 2021 | | | $ | | | % | | | Oct 2, 2022 | | | Sep 26, 2021 | | | $ | | | % |
United States | | | $20.3 | | | $19.1 | | | $1.2 | | | 6.3% | | | $62.5 | | | $55.4 | | | $7.1 | | | 12.8% |
International | | | 4.9 | | | 2.1 | | | 2.8 | | | 133.3% | | | 15.4 | | | 6.1 | | | 9.3 | | | 152.5% |
Total depreciation and amortization | | | $25.2 | | | $21.2 | | | $4.0 | | | 18.9% | | | $77.9 | | | $61.5 | | | $16.4 | | | 26.7% |
| | Nine Months Ended | | | Change | ||||
(in millions) | | | October 2, 2022 | | | September 26, 2021 | | ||
Net cash provided by (used by): | | | | | | | |||
Operating activities | | | $315.4 | | | $283.4 | | | $32.0 |
Investing activities | | | (99.1) | | | (85.6) | | | (13.5) |
Financing activities | | | (222.6) | | | (144.6) | | | (78.0) |
Effect of exchange rate on cash | | | (10.2) | | | 0.1 | | | (10.3) |
Net (decrease) increase in cash, cash equivalents and restricted cash | | | $(16.5) | | | $53.3 | | | $(69.8) |
| | Three Months Ended | | | Nine Months Ended | |||||||
| | October 2, 2022 | | | September 26, 2021 | | | October 2, 2022 | | | September 26, 2021 | |
Revenues: | | | | | | | | | ||||
Service revenues | | | $397.9 | | | $359.0 | | | $1,249.5 | | | $1,101.9 |
Vehicle and parts sales | | | 99.6 | | | 61.7 | | | 325.9 | | | 187.4 |
Total revenues | | | 497.5 | | | 420.7 | | | 1,575.4 | | | 1,289.3 |
Operating expenses: | | | | | | | | | ||||
Cost of services | | | 244.0 | | | 198.4 | | | 739.0 | | | 592.4 |
Cost of vehicle and parts sales | | | 93.3 | | | 54.5 | | | 293.0 | | | 160.5 |
Selling, general and administrative | | | 51.0 | | | 49.8 | | | 152.8 | | | 136.9 |
Depreciation and amortization | | | 25.2 | | | 21.2 | | | 77.9 | | | 61.5 |
Total operating expenses | | | 413.5 | | | 323.9 | | | 1,262.7 | | | 951.3 |
Operating profit | | | 84.0 | | | 96.8 | | | 312.7 | | | 338.0 |
Interest expense, net | | | 13.3 | | | 11.1 | | | 36.0 | | | 46.0 |
Other expense (income), net | | | 3.0 | | | 0.2 | | | 8.2 | | | (0.5) |
Income before income taxes | | | 67.7 | | | 85.5 | | | 268.5 | | | 292.5 |
Income taxes | | | 17.4 | | | 19.8 | | | 54.0 | | | 71.4 |
Net income | | | $50.3 | | | $65.7 | | | $214.5 | | | $221.1 |
Net income per share: | | | | | | | | | ||||
Basic | | | $0.38 | | | $0.49 | | | $1.60 | | | $1.64 |
Diluted | | | $0.38 | | | $0.49 | | | $1.60 | | | $1.63 |
| | Three Months Ended | | | Nine Months Ended | |||||||
| | October 2, 2022 | | | September 26, 2021 | | | October 2, 2022 | | | September 26, 2021 | |
Net income | | | $50.3 | | | $65.7 | | | $214.5 | | | $221.1 |
Other comprehensive (loss) income: | | | | | | | | | ||||
Foreign currency translation (loss) gain | | | (28.3) | | | (4.1) | | | (60.3) | | | 1.9 |
Comprehensive (loss) income | | | $22.0 | | | $61.6 | | | $154.2 | | | $223.0 |
| | October 2, 2022 | | | January 2, 2022 | |
| | (Unaudited) | | | (Audited) | |
Assets | | | | | ||
Current assets | | | | | ||
Cash and cash equivalents | | | $145.9 | | | $109.4 |
Restricted cash | | | — | | | 53.0 |
Accounts receivable, net of allowances of $9.3 and $9.1 | | | 418.0 | | | 465.7 |
Prepaid consigned vehicle charges | | | 60.6 | | | 72.2 |
Other current assets | | | 77.6 | | | 69.6 |
Total current assets | | | 702.1 | | | 769.9 |
Non-current assets | | | | | ||
Operating lease right-of-use assets, net of accumulated amortization of $311.1 and $238.3 | | | 1,146.3 | | | 1,024.4 |
Property and equipment, net of accumulated depreciation of $558.1 and $531.9 | | | 368.0 | | | 338.1 |
Goodwill | | | 748.7 | | | 797.5 |
Intangible assets, net of accumulated amortization of $590.0 and $549.6 | | | 185.1 | | | 197.5 |
Other assets | | | 31.2 | | | 26.9 |
Total non-current assets | | | 2,479.3 | | | 2,384.4 |
Total assets | | | $3,181.4 | | | $3,154.3 |
| | | | |||
Liabilities and Stockholders' Equity | | | | | ||
Current liabilities | | | | | ||
Accounts payable | | | $196.3 | | | $163.5 |
Short-term right-of-use operating lease liability | | | 87.9 | | | 94.3 |
Accrued employee benefits and compensation expenses | | | 27.4 | | | 44.2 |
Other accrued expenses | | | 77.2 | | | 124.6 |
Current maturities of long-term debt | | | 32.5 | | | 181.3 |
Total current liabilities | | | 421.3 | | | 607.9 |
Non-current liabilities | | | | | ||
Long-term debt | | | 1,098.2 | | | 1,120.6 |
Long-term right-of-use operating lease liability | | | 1,104.0 | | | 984.8 |
Deferred income tax liabilities | | | 69.6 | | | 74.8 |
Other liabilities | | | 24.4 | | | 32.6 |
Total non-current liabilities | | | 2,296.2 | | | 2,212.8 |
Commitments and contingencies (Note 9) | | | | | ||
Stockholders' equity | | | | | ||
Preferred stock, $0.01 par value: Authorized: 150.0 shares; issued and outstanding: none | | | — | | | — |
Common stock, $0.01 par value: Authorized: 750.0 shares; issued and outstanding: 133.8 shares at October 2, 2022 and 134.2 shares at January 2, 2022 | | | 1.3 | | | 1.3 |
Treasury stock at cost: 1.4 shares at October 2, 2022 and 0.7 shares at January 2, 2022 | | | (61.2) | | | (34.0) |
Additional paid-in capital | | | 21.9 | | | 18.6 |
Retained earnings | | | 576.6 | | | 362.1 |
Accumulated other comprehensive loss | | | (74.7) | | | (14.4) |
Total stockholders' equity | | | 463.9 | | | 333.6 |
Total liabilities and stockholders' equity | | | $3,181.4 | | | $3,154.3 |
| | Three Months Ended October 2, 2022 | ||||||||||||||||||||||
| | Common Stock | | | Treasury Stock | | | Additional Paid-In Capital | | | Retained Earnings | | | Accumulated Other Comprehensive Loss | | | Total Stockholders' Equity | |||||||
| | Shares | | | Amount | | | Shares | | | Amount | | ||||||||||||
Balance at July 3, 2022 | | | 133.7 | | | $1.3 | | | 1.4 | | | $(61.2) | | | $18.5 | | | $526.3 | | | $(46.4) | | | $438.5 |
Net income | | | — | | | — | | | — | | | — | | | — | | | 50.3 | | | — | | | 50.3 |
Foreign currency translation adjustments, net of tax | | | — | | | — | | | — | | | — | | | — | | | — | | | (28.3) | | | (28.3) |
Stock-based compensation expense | | | — | | | — | | | — | | | — | | | 3.1 | | | — | | | — | | | 3.1 |
Common stock issued for the exercise and vesting of stock-based awards | | | 0.1 | | | — | | | — | | | — | | | 0.1 | | | — | | | — | | | 0.1 |
Common stock issued for employee stock purchase plan | | | — | | | — | | | — | | | — | | | 0.4 | | | — | | | — | | | 0.4 |
Withholding taxes on stock-based awards | | | — | | | — | | | — | | | — | | | (0.2) | | | — | | | — | | | (0.2) |
Balance at October 2, 2022 | | | 133.8 | | | $1.3 | | | 1.4 | | | $(61.2) | | | $21.9 | | | $576.6 | | | $(74.7) | | | $463.9 |
| | Three Months Ended September 26, 2021 | ||||||||||||||||
| | Common Stock | | | Additional Paid-In Capital | | | Retained Earnings | | | Accumulated Other Comprehensive Loss | | | Total Stockholders' Equity | ||||
| | Shares | | | Amount | | ||||||||||||
Balance at June 27, 2021 | | | 134.8 | | | $1.3 | | | $11.4 | | | $223.1 | | | $(5.6) | | | $230.2 |
Net income | | | — | | | — | | | — | | | 65.7 | | | — | | | 65.7 |
Foreign currency translation adjustments, net of tax | | | — | | | — | | | — | | | — | | | (4.1) | | | (4.1) |
Stock-based compensation expense | | | — | | | — | | | 2.9 | | | — | | | — | | | 2.9 |
Common stock issued for the exercise and vesting of stock-based awards | | | — | | | — | | | 0.2 | | | — | | | — | | | 0.2 |
Common stock issued for employee stock purchase plan | | | — | | | — | | | 0.4 | | | — | | | — | | | 0.4 |
Withholding taxes on stock-based awards | | | — | | | — | | | (0.1) | | | — | | | — | | | (0.1) |
Balance at September 26, 2021 | | | 134.8 | | | $1.3 | | | $14.8 | | | $288.8 | | | $(9.7) | | | $295.2 |
| | Nine Months Ended October 2, 2022 | ||||||||||||||||||||||
| | Common Stock | | | Treasury Stock | | | Additional Paid-In Capital | | | Retained Earnings | | | Accumulated Other Comprehensive Loss | | | Total Stockholders' Equity | |||||||
| | Shares | | | Amount | | | Shares | | | Amount | | ||||||||||||
Balance at January 2, 2022 | | | 134.2 | | | $1.3 | | | 0.7 | | | $(34.0) | | | $18.6 | | | $362.1 | | | $(14.4) | | | $333.6 |
Net income | | | — | | | — | | | — | | | — | | | — | | | 214.5 | | | — | | | 214.5 |
Foreign currency translation adjustments, net of tax | | | — | | | — | | | — | | | — | | | — | | | — | | | (60.3) | | | (60.3) |
Purchase of treasury stock | | | (0.7) | | | — | | | 0.7 | | | (27.2) | | | — | | | — | | | — | | | (27.2) |
Stock-based compensation expense | | | — | | | — | | | — | | | — | | | 8.9 | | | — | | | — | | | 8.9 |
Common stock issued for the exercise and vesting of stock-based awards | | | 0.4 | | | — | | | — | | | — | | | 0.4 | | | — | | | — | | | 0.4 |
Common stock issued for employee stock purchase plan | | | — | | | — | | | — | | | — | | | 1.1 | | | — | | | — | | | 1.1 |
Withholding taxes on stock-based awards | | | (0.1) | | | — | | | — | | | — | | | (7.1) | | | — | | | — | | | (7.1) |
Balance at October 2, 2022 | | | 133.8 | | | $1.3 | | | 1.4 | | | $(61.2) | | | $21.9 | | | $576.6 | | | $(74.7) | | | $463.9 |
| | Nine Months Ended September 26, 2021 | ||||||||||||||||
| | Common Stock | | | Additional Paid-In Capital | | | Retained Earnings | | | Accumulated Other Comprehensive Loss | | | Total Stockholders' Equity | ||||
| | Shares | | | Amount | | ||||||||||||
Balance at December 27, 2020 | | | 134.5 | | | $1.3 | | | $12.0 | | | $67.7 | | | $(11.6) | | | $69.4 |
Net income | | | — | | | — | | | — | | | 221.1 | | | — | | | 221.1 |
Foreign currency translation adjustments, net of tax | | | — | | | — | | | — | | | — | | | 1.9 | | | 1.9 |
Stock-based compensation expense | | | — | | | — | | | 8.3 | | | — | | | — | | | 8.3 |
Common stock issued for the exercise and vesting of stock-based awards | | | 0.4 | | | — | | | 0.6 | | | — | | | — | | | 0.6 |
Common stock issued for employee stock purchase plan | | | — | | | — | | | 1.2 | | | — | | | — | | | 1.2 |
Withholding taxes on stock-based awards | | | (0.1) | | | — | | | (7.3) | | | — | | | — | | | (7.3) |
Balance at September 26, 2021 | | | 134.8 | | | $1.3 | | | $14.8 | | | $288.8 | | | $(9.7) | | | $295.2 |
| | Nine Months Ended | ||||
| | October 2, 2022 | | | September 26, 2021 | |
Operating activities | | | | | ||
Net income | | | $214.5 | | | $221.1 |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | ||
Depreciation and amortization | | | 77.9 | | | 61.5 |
Operating lease expense | | | 132.0 | | | 113.0 |
Stock-based compensation | | | 8.9 | | | 8.3 |
Provision for credit losses | | | 0.8 | | | 0.7 |
Loss on extinguishment of debt | | | — | | | 10.3 |
Amortization of debt issuance costs | | | 2.1 | | | 2.6 |
Deferred income taxes | | | (3.1) | | | 6.9 |
Change in contingent consideration liabilities | | | 4.9 | | | — |
Other | | | 6.9 | | | (0.4) |
Changes in operating assets and liabilities: | | | | | ||
Operating lease payments | | | (139.4) | | | (107.2) |
Accounts receivable and other assets | | | 53.1 | | | (75.0) |
Accounts payable and accrued expenses | | | (43.2) | | | 41.6 |
Net cash provided by operating activities | | | 315.4 | | | 283.4 |
Investing activities | | | | | ||
Acquisition of business, net of cash acquired | | | — | | | (4.0) |
Purchases of property, equipment and computer software | | | (135.9) | | | (80.0) |
Proceeds from the sale of property and equipment | | | 38.8 | | | 0.4 |
Other | | | (2.0) | | | (2.0) |
Net cash used by investing activities | | | (99.1) | | | (85.6) |
Financing activities | | | | | ||
Net increase in book overdrafts | | | 47.0 | | | — |
Proceeds from debt issuance | | | — | | | 650.0 |
Payments of long-term debt | | | (173.1) | | | (774.0) |
Deferred financing costs | | | (0.1) | | | (4.8) |
Finance lease payments | | | (8.9) | | | (9.0) |
Purchase of treasury stock | | | (27.2) | | | — |
Issuance of common stock under stock plans | | | 0.4 | | | 0.6 |
Proceeds from issuance of employee stock purchase plan shares | | | 1.1 | | | 1.2 |
Tax withholding payments for vested RSUs | | | (7.1) | | | (7.3) |
Payments of contingent consideration | | | (54.7) | | | (1.3) |
Net cash used by financing activities | | | (222.6) | | | (144.6) |
Effect of exchange rate changes on cash | | | (10.2) | | | 0.1 |
Net (decrease) increase in cash, cash equivalents and restricted cash | | | (16.5) | | | 53.3 |
Cash, cash equivalents and restricted cash at beginning of period | | | 162.4 | | | 232.8 |
Cash, cash equivalents and restricted cash at end of period | | | $145.9 | | | $286.1 |
Cash paid for interest, net | | | $27.8 | | | $27.1 |
Cash paid for taxes, net | | | $61.8 | | | $68.3 |
| | Period Ended | ||||
| | October 2, 2022 | | | January 2, 2022 | |
Reconciliation of cash, cash equivalents and restricted cash reported in balance sheets | | | | | ||
Cash and cash equivalents | | | $145.9 | | | $109.4 |
Restricted cash | | | — | | | 53.0 |
Total cash, cash equivalents and restricted cash shown in statements of cash flows | | | 145.9 | | | 162.4 |
| | Three Months Ended October 2, 2022 | | | Nine Months Ended October 2, 2022 | |||||||
| | Number of Awards Granted | | | Weighted Average Grant Date Fair Value | | | Number of Awards Granted | | | Weighted Average Grant Date Fair Value | |
PRSUs - Performance Condition | | | 1,628 | | | $36.82 | | | 117,932 | | | $38.34 |
PRSUs - Market Condition | | | 233 | | | $36.82 | | | 33,058 | | | $41.88 |
RSUs | | | 4,298 | | | $36.82 | | | 236,019 | | | $38.27 |
RSAs | | | — | | | $— | | | 35,282 | | | $35.00 |
| | Three Months Ended | | | Nine Months Ended | |||||||
| | October 2, 2022 | | | September 26, 2021 | | | October 2, 2022 | | | September 26, 2021 | |
Net income | | | $50.3 | | | $65.7 | | | $214.5 | | | $221.1 |
Weighted average common shares outstanding | | | 133.7 | | | 134.8 | | | 134.0 | | | 134.8 |
Effect of dilutive stock awards | | | 0.2 | | | 0.5 | | | 0.1 | | | 0.5 |
Weighted average common shares outstanding and potential common shares | | | 133.9 | | | 135.3 | | | 134.1 | | | 135.3 |
Net income per share | | | | | | | | | ||||
Basic | | | $0.38 | | | $0.49 | | | $1.60 | | | $1.64 |
Diluted | | | $0.38 | | | $0.49 | | | $1.60 | | | $1.63 |
| | Three Months Ended | | | Nine Months Ended | |||||||
| | October 2, 2022 | | | September 26, 2021 | | | October 2, 2022 | | | September 26, 2021 | |
Anti-dilutive awards | | | 0.3 | | | 0.1 | | | 0.3 | | | 0.1 |
Awards subject to conditions not fully satisfied | | | 0.3 | | | 0.2 | | | 0.3 | | | 0.2 |
Total | | | 0.6 | | | 0.3 | | | 0.6 | | | 0.3 |
| | October 2, 2022 | | | January 2, 2022 | |
Term Loan | | | $641.9 | | | $650.0 |
Notes | | | 500.0 | | | 500.0 |
Revolving Credit Facility | | | — | | | 165.0 |
Total debt | | | 1,141.9 | | | 1,315.0 |
Unamortized debt issuance costs | | | (11.2) | | | (13.1) |
Current maturities of long-term debt | | | (32.5) | | | (181.3) |
Long-term debt | | | $1,098.2 | | | $1,120.6 |
| | October 2, 2022 | | | January 2, 2022 | |
Advanced charges receivable | | | $286.0 | | | $322.7 |
Trade accounts receivable | | | 130.5 | | | 139.8 |
Other receivable | | | 10.8 | | | 12.3 |
Accounts receivable, gross | | | 427.3 | | | 474.8 |
Less: Allowance for credit losses | | | (9.3) | | | (9.1) |
Accounts receivable, net | | | $418.0 | | | $465.7 |
| | Three Months Ended | | | Nine Months Ended | |||||||
| | October 2, 2022 | | | September 26, 2021 | | | October 2, 2022 | | | September 26, 2021 | |
Operating lease cost | | | $45.2 | | | $39.7 | | | $132.0 | | | $113.0 |
| | | | | | | | |||||
Finance lease cost: | | | | | | | | | ||||
Amortization of right-of-use assets | | | $2.8 | | | $3.0 | | | $8.7 | | | $9.2 |
Interest on lease liabilities | | | 0.2 | | | 0.2 | | | 0.6 | | | 0.6 |
Total finance lease cost | | | $3.0 | | | $3.2 | | | $9.3 | | | $9.8 |
| | Nine Months Ended | ||||
| | October 2, 2022 | | | September 26, 2021 | |
Cash paid for amounts included in the measurement of lease liabilities: | | | | | ||
Operating cash flows related to operating leases | | | $139.4 | | | $107.2 |
Operating cash flows related to finance leases | | | $0.6 | | | $0.6 |
Financing cash flows related to finance leases | | | $8.9 | | | $9.0 |
Right-of-use assets obtained in exchange for lease obligations: | | | | | ||
Operating leases | | | $194.6 | | | $194.2 |
Finance leases | | | $0.2 | | | $7.6 |
| | October 26, 2021 | |
Cash | | | $260.2 |
Fair value of contingent consideration* | | | 51.4 |
Total fair value of consideration transferred | | | $311.6 |
| | October 26, 2021 | |
Cash | | | $7.1 |
Accounts receivable | | | 4.7 |
Inventory | | | 17.4 |
ROU assets | | | 39.0 |
| | October 26, 2021 | |
Property and equipment | | | 12.5 |
Goodwill | | | 256.4 |
Intangible assets | | | 41.3 |
Other assets | | | 1.4 |
Accounts payable and other accrued expenses | | | (18.9) |
Operating lease liabilities | | | (39.0) |
Other long-term liabilities | | | (10.3) |
Net assets acquired | | | $311.6 |
| | Three Months Ended September 26, 2021 | | | Nine Months Ended September 26, 2021 | |
Net revenue | | | $471.7 | | | $1,446.3 |
Net income | | | 67.2 | | | 222.0 |
| | Three Months Ended October 2, 2022 | | | Nine Months Ended October 2, 2022 | |||||||||||||
| | United States | | | International | | | Total | | | United States | | | International | | | Total | |
Revenues: | | | | | | | | | | | | | ||||||
Service revenues | | | $362.8 | | | $35.1 | | | $397.9 | | | $1,140.3 | | | $109.2 | | | $1,249.5 |
Vehicle and parts sales | | | 43.1 | | | 56.5 | | | 99.6 | | | 122.9 | | | 203.0 | | | 325.9 |
Total revenues | | | 405.9 | | | 91.6 | | | 497.5 | | | 1,263.2 | | | 312.2 | | | 1,575.4 |
Operating expenses: | | | | | | | | | | | | | ||||||
Cost of services | | | 215.1 | | | 28.9 | | | 244.0 | | | 648.6 | | | 90.4 | | | 739.0 |
Cost of vehicle and parts sales | | | 41.3 | | | 52.0 | | | 93.3 | | | 117.8 | | | 175.2 | | | 293.0 |
Selling, general and administrative | | | 45.8 | | | 5.2 | | | 51.0 | | | 135.3 | | | 17.5 | | | 152.8 |
Depreciation and amortization | | | 20.3 | | | 4.9 | | | 25.2 | | | 62.5 | | | 15.4 | | | 77.9 |
Total operating expenses | | | 322.5 | | | 91.0 | | | 413.5 | | | 964.2 | | | 298.5 | | | 1,262.7 |
Operating profit | | | 83.4 | | | 0.6 | | | 84.0 | | | 299.0 | | | 13.7 | | | 312.7 |
Interest expense (income), net | | | 13.6 | | | (0.3) | | | 13.3 | | | 36.3 | | | (0.3) | | | 36.0 |
Other expense (income), net | | | 3.4 | | | (0.4) | | | 3.0 | | | 8.1 | | | 0.1 | | | 8.2 |
Intercompany (income) expense | | | (1.8) | | | 1.8 | | | — | | | (5.8) | | | 5.8 | | | — |
Income (loss) before income taxes | | | 68.2 | | | (0.5) | | | 67.7 | | | 260.4 | | | 8.1 | | | 268.5 |
Income taxes | | | 16.8 | | | 0.6 | | | 17.4 | | | 50.7 | | | 3.3 | | | 54.0 |
Net income (loss) | | | $51.4 | | | $(1.1) | | | $50.3 | | | $209.7 | | | $4.8 | | | $214.5 |
Total assets | | | $2,663.1 | | | $518.3 | | | $3,181.4 | | | $2,663.1 | | | $518.3 | | | $3,181.4 |
| | Three Months Ended September 26, 2021 | | | Nine Months Ended September 26, 2021 | |||||||||||||
| | United States | | | International | | | Total | | | United States | | | International | | | Total | |
Revenues | | | | | | | | | | | | | ||||||
Service revenues | | | $336.5 | | | $22.5 | | | $359.0 | | | $1,027.9 | | | $74.0 | | | $1,101.9 |
Vehicle and parts sales | | | 32.6 | | | 29.1 | | | 61.7 | | | 92.5 | | | 94.9 | | | 187.4 |
Total revenues | | | 369.1 | | | 51.6 | | | 420.7 | | | 1,120.4 | | | 168.9 | | | 1,289.3 |
Operating expenses: | | | | | | | | | | | | | ||||||
Cost of services | | | 183.7 | | | 14.7 | | | 198.4 | | | 544.5 | | | 47.9 | | | 592.4 |
Cost of vehicle and parts sales | | | 29.2 | | | 25.3 | | | 54.5 | | | 76.9 | | | 83.6 | | | 160.5 |
Selling, general and administrative | | | 46.4 | | | 3.4 | | | 49.8 | | | 127.4 | | | 9.5 | | | 136.9 |
Depreciation and amortization | | | 19.1 | | | 2.1 | | | 21.2 | | | 55.4 | | | 6.1 | | | 61.5 |
Total operating expenses | | | 278.4 | | | 45.5 | | | 323.9 | | | 804.2 | | | 147.1 | | | 951.3 |
Operating profit | | | 90.7 | | | 6.1 | | | 96.8 | | | 316.2 | | | 21.8 | | | 338.0 |
Interest expense (income), net | | | 11.1 | | | — | | | 11.1 | | | 46.1 | | | (0.1) | | | 46.0 |
Other (income) expense, net | | | (0.2) | | | 0.4 | | | 0.2 | | | (0.5) | | | — | | | (0.5) |
Intercompany (income) expense | | | (1.8) | | | 1.8 | | | — | | | (6.2) | | | 6.2 | | | — |
Income before income taxes | | | 81.6 | | | 3.9 | | | 85.5 | | | 276.8 | | | 15.7 | | | 292.5 |
Income taxes | | | 19.0 | | | 0.8 | | | 19.8 | | | 67.2 | | | 4.2 | | | 71.4 |
Net income | | | $62.6 | | | $3.1 | | | $65.7 | | | $209.6 | | | $11.5 | | | $221.1 |
Total assets | | | $2,573.1 | | | $239.6 | | | $2,812.7 | | | $2,573.1 | | | $239.6 | | | $2,812.7 |
(a) | an aggregate of 168,308 RBA common shares on the exercise of RBA options were granted on the dates specified below pursuant to RBA’s Amended and Restated Stock Option Plan (the “RBA Stock Option Plan”): |
Exercise Date | | | Number of Options Exercised | | | Weighted Average Exercise Price (US$) |
8-Dec-2021 | | | 3,172 | | | $36.47 |
9-Dec-2021 | | | 252 | | | $34.34 |
10-Dec-2021 | | | 1,500 | | | $17.76 |
21-Dec-2021 | | | 75 | | | $33.79 |
29-Dec-2021 | | | 360 | | | $34.17 |
2-Jan-2022 | | | 1,644 | | | $24.84 |
3-Jan-2022 | | | 450 | | | $31.17 |
12-Jan-2022 | | | 3,266 | | | $32.16 |
13-Jan-2022 | | | 1,694 | | | $32.76 |
21-Jan-2022 | | | 60 | | | $15.90 |
11-Feb-2022 | | | 9,751 | | | $46.31 |
14-Feb-2022 | | | 492 | | | $32.16 |
23-Feb-2022 | | | 726 | | | $17.76 |
2-Mar-2022 | | | 500 | | | $23.44 |
3-Mar-2022 | | | 750 | | | $23.44 |
9-Mar-2022 | | | 803 | | | $47.30 |
10-Mar-2022 | | | 790 | | | $40.56 |
11-Mar-2022 | | | 727 | | | $35.85 |
14-Mar-2022 | | | 791 | | | $32.16 |
15-Mar-2022 | | | 106 | | | $40.64 |
21-Mar-2022 | | | 828 | | | $37.12 |
22-Mar-2022 | | | 1,393 | | | $36.54 |
23-Mar-2022 | | | 558 | | | $40.64 |
30-Mar-2022 | | | 613 | | | $48.93 |
5-Apr-2022 | | | 1,659 | | | $37.46 |
Exercise Date | | | Number of Options Exercised | | | Weighted Average Exercise Price (US$) |
7-Apr-2022 | | | 807 | | | $14.04 |
8-Apr-2022 | | | 526 | | | $35.74 |
18-Apr-2022 | | | 1,043 | | | $41.84 |
21-Apr-2022 | | | 850 | | | $38.22 |
12-May-2022 | | | 5,188 | | | $36.28 |
13-May-2022 | | | 3,156 | | | $40.43 |
16-May-2022 | | | 7,525 | | | $36.13 |
17-May-2022 | | | 3,500 | | | $24.84 |
18-May-2022 | | | 9,570 | | | $39.91 |
19-May-2022 | | | 4,216 | | | $37.09 |
31-May-2022 | | | 338 | | | $33.44 |
2-Jun-2022 | | | 1,230 | | | $32.16 |
3-Jun-2022 | | | 735 | | | $35.63 |
6-Jun-2022 | | | 920 | | | $33.79 |
8-Jun-2022 | | | 1,130 | | | $29.93 |
9-Jun-2022 | | | 8,796 | | | $26.83 |
15-Jun-2022 | | | 2,236 | | | $40.64 |
30-Jun-2022 | | | 816 | | | $32.16 |
1-Jul-2022 | | | 633 | | | $37.51 |
6-Jul-2022 | | | 5,028 | | | $34.37 |
7-Jul-2022 | | | 2,262 | | | $33.54 |
11-Jul-2022 | | | 874 | | | $33.26 |
19-Jul-2022 | | | 2,247 | | | $37.80 |
20-Jul-2022 | | | 521 | | | $54.83 |
26-Jul-2022 | | | 350 | | | $31.17 |
27-Jul-2022 | | | 1,720 | | | $32.16 |
1-Aug-2022 | | | 1,350 | | | $20.94 |
2-Aug-2022 | | | 3,922 | | | $43.38 |
3-Aug-2022 | | | 2,818 | | | $39.32 |
4-Aug-2022 | | | 18,967 | | | $41.40 |
5-Aug-2022 | | | 6,371 | | | $35.46 |
8-Aug-2022 | | | 60 | | | $11.40 |
11-Aug-2022 | | | 4,250 | | | $41.56 |
12-Aug-2022 | | | 8,936 | | | $41.47 |
16-Aug-2022 | | | 1,896 | | | $32.16 |
17-Aug-2022 | | | 601 | | | $49.23 |
19-Aug-2022 | | | 1,665 | | | $47.12 |
29-Aug-2022 | | | 417 | | | $24.84 |
7-Sep-2022 | | | 6,773 | | | $33.79 |
9-Sep-2022 | | | 800 | | | $35.82 |
22-Sep-2022 | | | 1,098 | | | $33.76 |
23-Sep-2022 | | | 395 | | | $32.16 |
29-Sep-2022 | | | 1,557 | | | $41.41 |
7-Oct-2022 | | | 968 | | | $17.76 |
25-Oct-2022 | | | 428 | | | $44.76 |
23-Nov-2022 | | | 250 | | | $33.79 |
30-Nov-2022 | | | 714 | | | $32.16 |
5-Dec-2022 | | | 1,373 | | | $24.07 |
12-Dec-2022 | | | 100 | | | $33.79 |
Exercise Date | | | Number of Options Exercised | | | Weighted Average Exercise Price (US$) |
27-Dec-2022 | | | 393 | | | $11.80 |
29-Dec-2022 | | | 968 | | | $31.17 |
6-Jan-2023 | | | 490 | | | $24.84 |
12-Jan-2023 | | | 1,138 | | | $41.38 |
13-Jan-2023 | | | 433 | | | $24.07 |
(b) | an aggregate of 629,877 RBA options to acquire 629,877 RBA common shares was granted on March 15, 2022 at an exercise price of US$57.70 per RBA common share pursuant to the RBA Stock Option Plan; |
(c) | an aggregate of 149,540 Performance Share Units of RBA to acquire 149,540 RBA common shares was granted on March 15, 2022 pursuant to RBA’s Employee Performance Share Unit Plan and RBA’s Senior Executive Performance Share Unit Plan (together, the “RBA Performance Share Unit Plans:”); |
(d) | an aggregate of 33,089.25 Restricted Share Units of RBA to acquire 33,089.25 RBA common shares was granted on March 15, 2022 pursuant to RBA’s Amended and Restated Employee Restricted Share Unit Plan and RBA’s Amended and Restated Senior Executive Restricted Share Unit Plan (together, the “RBA Restricted Share Unit Plans”); |
(e) | an aggregate of 85,667 Performance Share Units of RBA to acquire 85,667 RBA common shares was granted on June 6, 2022 pursuant to the RBA Performance Share Unit Plans; |
(f) | an aggregate of 20.38 Restricted Share Units of RBA to acquire 20.38 RBA common shares was granted on June 6, 2022 pursuant to the RBA Restricted Share Unit Plans; |
(g) | an aggregate of 178,717 RBA options to acquire 178,717 RBA common shares was granted on June 6, 2022 at an exercise price of US$61.38 per RBA common share pursuant to the RBA Stock Option Plan; |
(h) | an aggregate of 2,211.13 Performance Share Units of RBA to acquire 2,211.13 RBA common shares was granted on September 9, 2022 pursuant to the RBA Performance Share Unit Plans; |
(i) | an aggregate of 8,099 RBA options to acquire 8,099 RBA common shares was granted on September 9, 2022 at an exercise price of US$61.38 per RBA common share pursuant to the RBA Stock Option Plan; |
(j) | an aggregate of 13,311 RBA options to acquire 13,311 RBA common shares was granted on December 16, 2022 at an exercise price of US$55.18 per RBA common share pursuant to the RBA Stock Option Plan; |
(k) | an aggregate of 3,527.50 RBA common shares was issued on December 16, 2022 on the vesting of Performance Share Units of RBA issued pursuant to the RBA Performance Share Unit Plans; |
(l) | an aggregate of 3,288 RBA common shares was issued on December 13, 2021 on the vesting of Restricted Share Units of RBA issued pursuant to the RBA Restricted Share Unit Plans; |
(m) | an aggregate of 12,278 RBA common shares was issued on March 14, 2022 on the vesting of Restricted Share Units of RBA issued pursuant to the RBA Restricted Share Unit Plans; |
(n) | an aggregate of 80,668 RBA common shares was issued on March 15, 2022 on the vesting of Performance Share Units of RBA issued pursuant to the RBA Performance Share Unit Plans; |
(o) | an aggregate of 610 RBA common shares was issued on May 20, 2022 on the vesting of Restricted Share Units of RBA issued pursuant to the RBA Restricted Share Unit Plans; |
(p) | an aggregate of 3,484 RBA common shares was issued on August 15, 2022 on the vesting of Restricted Share Units of RBA issued pursuant to the RBA Restricted Share Unit Plans; |
(q) | an aggregate of 2,986 RBA common shares was issued on November 24, 2022 on the vesting of Restricted Share Units of RBA issued pursuant to the RBA Restricted Share Unit Plans; |
(r) | an aggregate of 3,368 RBA common shares was issued on December 29, 2022 on the vesting of Restricted Share Units of RBA issued pursuant to the RBA Restricted Share Unit Plans; |
(s) | an aggregate of 8,304.22 RBA common shares was issued on December 15, 2021 at a price of US$66.26 per RBA common share issued pursuant to the RBA ESPP; |
(t) | an aggregate of 9,112.29 RBA common shares was issued on January 14, 2022 at a price of US$61.14 per RBA common share issued pursuant to the RBA ESPP; and |
(u) | an aggregate of 10,559.24 RBA common shares was issued on December 15, 2022 at a price of US$56.71 per RBA common share issued pursuant to the RBA ESPP; |
(v) | an aggregate of 9,810.41 RBA common shares was issued on January 18, 2023 at a price of US$59.44 per RBA common share issued pursuant to the RBA ESPP; |
(w) | an aggregate of 496.51 RBA common shares was issued on January 18, 2023 at a price of US$59.51 per RBA common share issued pursuant to the RBA ESPP; |
(x) | an aggregate of 63,971 RBA common shares was issued on November 2, 2021 to certain SmartEquip executives upon the close of the SmartEquip acquisition at an issue price of US$68.39 per RBA common share. |
(y) | an aggregate of 485,000,000 RBA senior preferred shares designated as Series A Senior Preferred Shares was issued on February 1, 2023 to the Starboard purchasers at an issue price of US$1.00 per preferred share, and an aggregate of 251,163 RBA common shares to Starboard purchasers at an issue price of US$59.722 per RBA common share. |
| Date | | | TSX (CA$) | | | NYSE (US$) | |
| November 4, 2022 | | | 84.07 | | | 62.32 | |
| February 7, 2023 | | | 83.03 | | | 62.00 | |
Period | | | RBA common share Price Low (CA$) | | | RBA common share Price High (CA$) | | | Volume |
December 2021 | | | 76.93 | | | 90.63 | | | 3,187,463 |
January 2022 | | | 72.83 | | | 80.54 | | | 3,789,607 |
February 2022 | | | 62.02 | | | 79.84 | | | 4,319,379 |
March 2022 | | | 66.31 | | | 76.62 | | | 3,715,890 |
April 2022 | | | 68.62 | | | 75.71 | | | 2,981,178 |
May 2022 | | | 65.85 | | | 81.03 | | | 4,612,578 |
June 2022 | | | 75.00 | | | 83.79 | | | 3,705,489 |
July 2022 | | | 78.30 | | | 92.98 | | | 4,031,405 |
August 2022 | | | 85.81 | | | 93.50 | | | 3,424,715 |
September 2022 | | | 84.53 | | | 94.18 | | | 3,827,126 |
October 2022 | | | 82.18 | | | 90.00 | | | 2,640,383 |
November 2022 | | | 65.83 | | | 90.55 | | | 8,838,087 |
December 2022 | | | 72.23 | | | 79.19 | | | 4,708,872 |
January 2023 | | | 76.02 | | | 83.35 | | | 4,262,462 |
February 1 - 7, 2023 | | | 79.86 | | | 84.26 | | | 977,481 |
Period | | | RBA common share Price Low (US$) | | | RBA common share Price High (US$) | | | Volume |
December 2021 | | | 59.55 | | | 71.65 | | | 8,983,030 |
January 2022 | | | 57.10 | | | 64.59 | | | 10,083,033 |
February 2022 | | | 48.65 | | | 63.02 | | | 13,917,428 |
March 2022 | | | 52.38 | | | 60.59 | | | 8,598,721 |
April 2022 | | | 54.38 | | | 61.03 | | | 6,681,592 |
May 2022 | | | 50.69 | | | 63.09 | | | 10,979,731 |
June 2022 | | | 58.55 | | | 65.10 | | | 9,051,562 |
July 2022 | | | 60.34 | | | 72.61 | | | 11,715,372 |
August 2022 | | | 66.30 | | | 72.73 | | | 9,051,064 |
September 2022 | | | 62.08 | | | 71.96 | | | 8,254,839 |
October 2022 | | | 58.72 | | | 66.03 | | | 6,338,714 |
November 2022 | | | 48.72 | | | 66.02 | | | 39,476,912 |
December 2022 | | | 53.56 | | | 58.33 | | | 25,716,732 |
January 2023 | | | 57.00 | | | 62.25 | | | 38,154,891 |
February 1 - 7, 2023 | | | 60.29 | | | 63.23 | | | 5,463,275 |
1. | Sixth Amendment to Credit Agreement, dated as of December 9, 2022, among RBA, certain of its subsidiaries, each as a borrower and/or a guarantor, the lenders party thereto, Bank of America, N.A., as administrative agent, U.S. swing line lender and a letter of credit issuer; |
2. | Commitment Letter, dated November 7, 2022, from Goldman Sachs Bank USA, Bank of America, N.A., BofA Securities, Inc., Royal Bank of Canada and RBC Capital Markets, LLC.; |
3. | Original merger agreement; |
4. | Amendment to the merger agreement; and |
5. | Securities Purchase Agreement, dated as of January 22, 2023, by and among RBA and the investors party thereto; and |
6. | Registration Rights Agreement, dated as of February 1, 2023, by and among RBA and the other parties thereto. |
Plan Category | | | Number of securities to be issued upon exercise of options, warrants and rights (a) | | | Weighted average exercise price of outstanding options, warrants and rights (b) | | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) |
Equity compensation plans approved by security holders | | | 4,627,600(1) | | | $60.38(2) | | | 5,299,246(3) |
Equity compensation plans not approved by security holders | | | — | | | — | | | — |
Total | | | 4,627,600 | | | $60.38 | | | 5,299,246 |
(1) | Reflects RBA’s Stock Option Plan, the IronPlanet Stock Plans, PSUs granted under the Executive PSU Plan and the Employee PSU Plan, and equity-classified RSUs. This amount reflects 100% of target numbers of PSUs granted and includes dividend equivalent rights credited in connection with such PSUs. Under the PSU Plans, the number of PSUs that vest is conditional upon specified market, service, and/or performance vesting conditions being met. For the Special Award share units granted in August and November 2021, and June 2022 under the PSU Plans, the market vesting condition is based on the relative performance of RBA’s share price in comparison to the performance of the S&P 500 index members as of the date of grant. These Special Awards can result in participants earning between 0% and 300% of the target number of Special Award PSU share units granted. There were no market vesting conditions for the share units granted under the PSU Plans in 2019 and 2020. All non-Special Award share units granted under RBA’s PSU plans contain non-market vesting conditions that are based on the achievement of specific performance measures and can result in participants earning between 0% and 200% of the target number of PSUs granted. Further, we have the option to choose whether to settle the PSUs in cash or in shares. |
(2) | Weighted average exercise price does not include the effect of our outstanding share units. The remaining term of our stock options is 6.6 years. |
(3) | Consists of: (a) 3,919,069 RBA common shares available for issuance under the Stock Option Plan; (b) no common shares are available for issuance under the IronPlanet Stock Plans; (c) 778,551 RBA common shares that RBA may elect to issue upon settlement of ITS PSUs granted under the PSU Plans; and (d) 601,626 RBA common shares that RBA may elect to issue upon settlement of our RSUs granted under the RSU Plans. |
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