Monro Muffler Brake, Inc. last month acquired 36 Mr. Tire locations in Maryland and Virginia from privately held Mile One Automotive.
For distributors in Maryland and Virginia, it’s worth noting that the deal appeals to another service company, TBC Corporation – which owns Tire Kingdom, NTB, Big O and Merchants. During TBC’s fourth quarter conference call, analyst John Lawrence of Morgan Keegan asked TBC Corp. President and CEO Larry Day for his thoughts regarding Monro’s acquisition. Day considers it a great move.
“Rob Gross (Monro’s President and CEO) is an outstanding exec and he is going to put together some of those smaller chains. And we quite honestly look forward to some healthy competition,” replied Day. “But at the same time, keep in mind that one of chains that he acquired, Kimmel Tire, is a customer of mine in the private brands division. And the improvements that Monro has instituted in that chain has led to additional sales for me. So I’m looking forward to pursuing Mr. Tire very aggressively as a private brands customer.”
The transaction is an asset purchase, valued at approximately $29 million and includes 26 tire and automotive repair stores and 10 kiosks located in Mile One automobile dealerships. Monro expects to close the transaction this month.
“The acquisition represents an exciting opportunity to increase our market share in the mid-Atlantic region, particularly in the important Baltimore, Maryland market. Mr. Tire has a dominant presence, strong brand recognition and I believe the best performance in that market,” said Gross in a release following the deal.
The stores and kiosks that are being acquired generated approximately $50 million in sales last year.
“We anticipate an EBITDA contribution of between $5 million and $6 million in the first year,” said Gross. “As such, we expect the acquisition to be immediately accretive to earnings and to contribute approximately six to 10 cents per share during fiscal 2005, which begins March 28.”
Mr. Tire has posted comparable store sales increases in excess of 12 percent in each of the past two years, according to Gross.
“We expect the increased volume to improve our tire margins chain wide. Combined with our 24 Kimmel and Speedy stores in the area and contiguous Tread Quarters tire stores in Virginia, we anticipate near-term synergies in operations, purchasing, logistics and advertising, leading to increasing profitability beyond fiscal 2005.”
The company has no plans to close any of the Mr. Tire locations, and the stores will continue to operate under the current brand name.
