Ritchie Bros.' IronPlanet Deal Has A Compelling Case To The Upside, According To Baird

The brokerage believes the main positive factor of the two merged auction platform is that it could scale advantages in the auction channel since the addressable market size is projected at $360 billion. The deal provides Ritchie Bros. fresh markets, segments, channels and accelerated growth apart from securing a Caterpillar Inc. CAT alliance.

Aside from these, the acquisition could provide a path toward establishing an international multi-channel platform with a clear-cut focus. Although it might take some time to realize the full benefits of the integration, Baird analysts, led by Craig Kennison, are ready to wait since it provides compelling case to the upside.

Related Link: Bank Of America Upgrades Ritchie Bros. Auctioneers To Neutral

In a research note to clients, the lead analyst said, "We expect Ritchie to leverage other investments, including the IronPlanet IronClad assurance program — a process that injects confidence in online transactions. Increases digital/ecommerce footprint. With combined online sales over $3 billion, RB/IP would rank among the 50 largest B2B ecommerce platforms in the world."

On the challenges ahead, the brokerage doesn't see any reason for regulators to block the acquisition of IronPlanet by Ritchie Bros. However, the deal is unlikely to be completed in the current year and could well enter into next year, thus limiting visibility.

At time of writing, Ritchie Bros. was down 2.53 percent at $34.64.