Monro Muffler Brake Inc. has acquired a 13-percent share in R&S Parts and Service Inc., a privately owned auto parts and service chain that operates 101 outlets as Strauss Discount Auto, and intends to ``significantly'' expand its tire business.
The deal, for about $2 million, includes the opportunity for Monro to purchase 100 percent of the company eventually from GDJ Retail L.L.C. For a cash payment of $3 million, Monro can acquire an additional 20-percent stake in Strauss on or before March 31. If it makes that investment, the company then will have the opportunity to buy the remaining 67 percent of Strauss for $9 million cash plus $1 million of Monro stock anytime prior to April 1, 2007.
As a part of the transaction, Monro said it will provide R&S with $5 million of secured debt carrying a five-year term and an 8-percent interest rate. Monro, in turn, will receive $60,000 per month in consulting fees for providing strategic advice and cost savings related to R&S's operations and growth strategy.
Rochester-based Monro said the purchase will be funded through its existing credit facility and is expected to be relatively neutral to the company's bottom line this fiscal year.
Monro reported that comparable store sales in October rose about 2 percent vs. the same 2004 period. Additionally, comparable store sales for the second half of October and first week in fiscal November showed progressive improvement as compared to the first half of October.
R&S operates 101 retail stores under the name of Strauss Discount Auto that provide automotive parts and accessories. Of those, 71 also have service bays offering a full range of aftermarket services.
The stores-located throughout New York, New Jersey and Philadelphia-generate approximately $170 million in annual sales.
Robert G. Gross, Monro's president and CEO, said his firm's investment in R&S ``furthers our strategy to be the dominant automotive aftermarket service provider within our current 17 state footprint.
``We are extremely excited about R&S's solid presence in highly desirable markets, and we believe they will benefit from our relationships and industry expertise.''
The combined buying power of both companies ``should reap benefits to both,'' he added.
``In connection with our initial investment,'' Mr. Gross continued, ``we will work with Strauss to identify potential synergies and new avenues for growth specifically in the tire business, as well as evaluate ways to optimize Strauss' existing assets.''
R&S sells about 200,000 to 250,000 tire units per year, Mr. Gross said, while Monro sells approximately 1 million tire units per year.
Mr. Gross noted that Monro expects to ``significantly expand Strauss' tire business.''
R&S CEO Glenn Langberg said ``Monro's resources and talent will allow us to take better advantage of the opportunities in the marketplace and enhance our profitability.''
Monro operates a 624-store chain, including 16 dealer locations, in Connecticut, Delaware, Indiana, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Vermont, Virginia and West Virginia.
The stores-which provide a full range of services for exhaust, brake, steering and suspension systems, tires and other vehicle maintenance services-operate under the brand names Monro Muffler Brake and Service, Speedy Auto Service by Monro, Mr. Tire and Tread Quarters Discount Tires.
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By the numbers
* Value of Monro's 13-percent share in R&S Parts and Service Inc.-$2 million.
* Number of Strauss Discount Auto outlets-101.
* Annual sales generated by Strauss stores-$170 million.
* Number of tires sold annually by Strauss Discount-200,000-250,000.
* Number of tires sold annually by Monro-1 million.