PALM BEACH GARDENS, Fla. (March 13, 2012) — TBC Corp. has agreed to buy automotive service provider and franchisor Midas Inc. in a deal valued at about $310 million that will add the iconic Midas and SpeeDee brand names to TBC's portfolio of retail identities.
TBC is offering Midas shareholders $11.50 a share, which represents a 28-percent premium over the stock's closing price on March 12 and a 75-percent premium over the stock's closing price of $6.58 on Aug. 11, 2011, when Midas announced it would conduct a strategic review process deal.
TBC's offer consists of about $310 million in cash, including the assumption of $137 million in debt and pension liabilities, the companies said.
Midas reported net earnings of $4 million for the year ended Dec. 31 on sales of $183.6 million. The income came despite a $400,000 loss in the fourth quarter, and sales were down in both the fourth quarter and year, which Midas attributed to having 23 fewer company-operated Midas shops during 2011, the result of the company's re-franchising efforts.
Franchising revenue during the year came to $54.2 million.
The proposed transaction has been approved unanimously by both companies' boards of directors, the firms said. In addition, Midas Chairman, President and CEO Alan Feldman has signed a tender and voting agreement in support of the offer.
“With nearly 2,300 locations worldwide, Midas is a leader in automotive services and we are very excited to welcome such an iconic brand into our portfolio,” said TBC Chairman and CEO Lawrence Day. “By combining the strengths of Midas' platform with our industry expertise and financial resources, we will build on their current momentum and take the company to the next level.”
Mr. Friedman said the transaction is “strategically compelling” and “represents a significant and immediate premium for our shareholders.
“The combination of these two highly complementary businesses will provide significant opportunities for Midas to prosper in the future and will create enhanced opportunities for franchisees and strong benefits to customers,” he added.
Under the terms of the merger agreement, TBC will commence a cash tender offer no later than March 28. The companies expect the transaction, which is subject to customary terms and conditions, including regulatory clearance under the Hart-Scott-Rodino Antitrust Improvements Act, to close by the end of the second quarter.
There are more than 2,250 franchised, licensed and company-owned Midas shops in 14 countries, according to Midas year-end figures, including nearly 1,500 in the U.S. and Canada. Of those, 78 Midas shops were company-operated locations. Midas also owns the SpeeDee Oil Change business, with 161 auto service centers in the U.S. and Mexico, including six SpeeDee shops that are company owned.
Together, the 2,250-plus shops genarate annual sales of more than $1.5 billion, Midas figures show, or roughly $650,000 per location.
TBC already is the No. 1 or 2 retail tire and auto service provider in the U.S. with more than 775 Tire Kingdom, Merchant's Tire and NTB National Tire & Battery locations to go with about 400 Big O Tires locations, both company operated and franchised. Annual retail-related sales are estimated to be in excess of $2.25 billion.
TBC also is among the largest wholesalers in the U.S. through its Carroll Tire Co., Treadways and National Tire Warehouse units as well as a major private brand tire distributor through its TBC Brands and TBC International units.
TBC is owned by Sumitomo Corp. of America, the largest subsidiary of Japan's Sumitomo Corp., a major integrated trading and investment business enterprises.
The merger agreement also provides for customary termination fees payable by Midas under certain circumstances and a provision under which Midas has agreed not to solicit any competing offers.
Morgan Joseph TriArtisan L.L.C. is acting as financial adviser to TBC and Morgan Lewis & Bockius is acting as legal adviser. J.P. Morgan Securities L.L.C. is acting as the financial adviser to Midas and Kirkland & Ellis L.L.P. is acting as legal adviser.