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March 13, 2006 01:00 AM

Monro marches onward

Lisa Hockensmith
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    Monro Muffler Brake Inc. has offered to buy the assets of ProCare Automotive Service Solutions L.L.C., which filed for Chapter 11 bankruptcy protection March 5, for about $14 million in cash.

    The bid, which needs to be approved by the bankruptcy court overseeing ProCare's Chapter 11 case, also includes $3.65 million debtor-in-possession financing to ProCare to be used for general working capital needs pending approval of the deal. Those funds will be repaid upon completion of the deal, Monro said.

    Monro cautioned that its bid is subject to procedures to be outlined by the court and that the court is free to entertain other bids for Independence, Ohio-based ProCare.

    Monro expects to operate all of ProCare's existing 82 stores as either service or tire stores. ProCare operates primarily in eight metro areas in Ohio, Pennsylvania and Kentucky. The stores generate about $50 million in annual sales, Monro said.

    ProCare reported net sales last year of $62 million and a loss of $2.7 million in earnings before interest, taxes and depreciation, according to a motion filed with the bankruptcy court. ProCare sells Bridgestone, BFGoodrich, Firestone, General, Kelly, Monarch and Yokohama brands, according to its Web site.

    ProCare also said in the motion that it owes creditors $9.1 million in secured debt including notes, real estate mortgages and a credit card line plus $17.9 million in unsecured debt.

    ``This filing provides us with the best opportunity to continue business as usual for our employees and customers, while realigning our business operations in anticipation of selling to Monro,'' ProCare CEO Eric Martinez said.

    In light of this deal, Monro and Strauss Discount Auto have amended their agreement from late last year, giving Monro the option to buy the remaining 87-percent stake in Strauss on or before Sept. 30. Monro bought 13 percent ownership in the chain with an option to buy an additional 20 percent by March 31 and the remaining 67 percent by April 1, 2007.

    Monro said ``it would not be prudent'' to attempt two large acquisitions at once, and ProCare's filing required ``immediate attention so as not to lose the opportunity.''

    ``We are excited about the potential acquisition of ProCare, as its regional heritage and industry expertise would complement our existing business and enhance our market share,'' said Robert Gross, president and CEO of Monro.

    ProCare originally was a unit of BP Amoco P.L.C., which divested it in 1999 after determining it did not fit the oil giant's corporate strategy. It grew to as many as 120 outlets in 2001 by buying 23 America's Service Station locations in Texas. Those since have been divested or closed.

    The majority of ProCare's revenue has come from automotive service, with tires accounting for less than 10 percent of the chain's profits.

    Monro operates about 626 outlets, 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 operate under the brand names Monro Muffler Brake and Service, Speedy Auto Service by Monro, Mr. Tire and Tread Quarters Discount Tires. Monro sells about 1 million tires annually.

    Crain News Service contributed to this report.

    * * *

    ProCare profile

    * 82 outlets in eight metro areas in Ohio, Pennsylvania and Kentucky

    * Annual sales: about $50 million

    * Net sales in 2005: $62 million

    * Loss in 2005: $2.7 million

    * Tire brands: Bridgestone, BFGoodrich, Firestone, General, Kelly, Monarch, Yokohama

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