Monro Muffler Brake Inc. has paid GDJ Retail LLC $2 million for a 13% stake in R&S Parts and Service Inc., a privately owned automotive aftermarket parts and service chain.
R&S operates 101 retail stores under the name of Strauss Discount Auto; the stores offer automotive parts and accessories. More than half -- 71 -- of the stores also have service bays that offer a full range of aftermarket services.
The stores generate approximately $170 million in annual sales and are located throughout New York, New Jersey and Philadelphia.
As a part of the transaction, Monro will provide R&S with $5 million of secured debt that carries a five-year term and an 8% interest rate. Additionally, Monro 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.
Monro says the transaction will be funded through its existing credit facility and is expected to be relatively neutral to the bottom line this fiscal year.
Monro also has the option to purchase an additional 20% stake in Strauss on or before March 31, 2006, for a cash payment of $3 million. If Monro decides to make this investment, it will have the
opportunity to buy the remaining 67% of Strauss for $9 million cash plus $1 million of Monro stock anytime prior to April 1, 2007.
"Our investment in R&S furthers our strategy to be the dominant automotive aftermarket service provider within our current 17 state footprint," says Robert Gross, Monro's CEO and president. "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.
"Additionally, our combined buying power should reap benefits to both Strauss and Monro in the future. In connection with our initial investment, 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."
Glenn Langberg, CEO of R&S, says the transaction does more than provide the company with growth capital. "Monro's resources and talent will allow us to take better advantage of the opportunities in the marketplace and enhance our profitability."
