Failure to exercise option does not mean Monro is walking away from Strauss
Monro Muffler Brake Inc. says it will not exercise its option to purchase the 87% of Strauss Discount Auto that it currently does not own.
On Nov. 1, 2005, Monro acquired both a 13% stake in Strauss and the option to acquire the remaining 87% of Strauss' common stock. Due to continued deterioration in Strauss' financial condition and operating performance, the company has concluded that the terms of the original option agreement no longer represent a good value for Monro.
Additionally, Strauss filed petitions for relief under Chapter 11 of the United States Bankruptcy Code and appeared at its first day hearing on Friday, Aug. 11. As such, Monro intends to explore a possible purchase of selected assets of Strauss through the bankruptcy process.
"We concluded that the terms of our initial agreement no longer presented a viable basis for exercising the option in light of Strauss' financial condition and operating performance," says Robert Gross, Monro's CEO and president. "While we made every attempt to renegotiate the terms of the option agreement at a price that we believe reflected Strauss' recent performance, we were unable to reach an agreement.
"That said, we believe that Monro and its shareholders will be best served by exploring the purchase of selected Strauss assets through the bankruptcy process. We remain committed to buying right and will carefully evaluate any purchase of Strauss' assets in light of its current and expected operating performance as well other opportunities in the marketplace.
"We are comfortable in our ability to successfully integrate any assets we may purchase from Strauss, as long as we can acquire those assets at an attractive price," says Gross. "We have been pleased with the progress to date of our turnaround and integration of the ProCare Automotive Service Solutions' assets that we recently purchased out of Chapter 11, and we would bring the same expertise to a Strauss purchase."
Monro says it expects it will be paid in full on its existing $5 million secured loan to Strauss. Further, the company will review its equity investment and other costs related to Strauss for impairment, which is expected to result in a charge of up to $1.7 million, after tax, in the company's second fiscal quarter.