8-K: Valvoline to Acquire Breeze Autocare, Adding Nearly 200 Stores

Valvoline Inc. has signed a definitive agreement to acquire Breeze Autocare for approximately $625 million, adding nearly 200 stores to its network.

Summary

• Valvoline Inc. has agreed to acquire Breeze Autocare from Greenbriar Equity Group for approximately $625 million in cash.
• Breeze Autocare operates nearly 200 stores across 17 states, primarily under the Oil Changers brand.
• The acquisition is expected to close in fiscal Q3 2025, pending customary closing conditions and regulatory approvals.
• Breeze Autocare generated $200 million in net sales for its most recent year end.
• The purchase price represents a multiple of 10.7 times Breeze Autocare's adjusted EBITDA.
• Valvoline intends to fund the acquisition with a newly issued Term Loan B.
• The company will pause its share repurchase activity and anticipates reaching a rating agency adjusted net leverage ratio of 2.5x 3.5x within 24 months post-close.
• The transaction is expected to be relatively neutral to Valvoline's adjusted diluted EPS in the first year and accretive over time.

Sentiment

Score: 8

Explanation: The document presents a positive outlook on the acquisition, highlighting strategic and financial benefits, and management expresses confidence in the integration and future growth.

Positives

• The acquisition will accelerate Valvoline's network growth and expand its customer reach.
• Breeze Autocare's employee and customer-focused operating model aligns with Valvoline's culture.
• The acquisition allows Valvoline to leverage scale advantages, such as retail-specific technology investments and fleet sales expansion.
• The transaction is expected to deliver top-line sales and profit growth and enhance Valvoline's cash flow profile.
• Valvoline has a strong track record of successful acquisition integration.

Negatives

• Valvoline will pause its share repurchase activity to fund the acquisition.
• The transaction is expected to be relatively neutral to Valvoline's adjusted diluted EPS in the first year.

Risks

• The transaction is subject to customary closing conditions and regulatory approvals, which may not be satisfied.
• Integration of Breeze Autocare may present challenges and may not result in the expected synergies.
• The company anticipates reaching a rating agency adjusted net leverage ratio of 2.5x 3.5x within 24 months post-close.

Future Outlook

Valvoline expects the acquisition to accelerate its growth and earnings potential while enhancing its cash flow profile, with a goal to grow its network to 3,500-plus stores.

Management Comments

• Lori Flees, President and CEO: 'Welcoming Breeze Autocare into the Valvoline network allows us to immediately add nearly 200 stores that are geographically complementary and will expand our customer reach.'
• Eric Frankenberger, President and CEO of Breeze Autocare: 'Valvoline has been a respected name in preventive maintenance for decades and we look forward to joining forces with them.'

Industry Context

The acquisition reflects a trend of consolidation in the automotive maintenance service industry, with larger players seeking to expand their geographic footprint and service offerings.

Comparison to Industry Standards

• Comparable companies in the automotive aftermarket service industry include Driven Brands (DRVN) and Mavis Tire Express Services.
• The 10.7x adjusted EBITDA multiple is within the typical range for acquisitions in this sector, but the specific value depends on factors like growth rate, profitability, and market position.
• Driven Brands, for example, has pursued a similar strategy of acquiring and integrating various automotive service businesses.

Stakeholder Impact

• Shareholders: The acquisition is expected to create shareholder value through network growth and enhanced financial performance.
• Employees: The integration of Breeze Autocare is expected to benefit team members through combined expertise and culture.
• Customers: The acquisition is expected to expand customer reach and provide access to a broader network of service centers.

Next Steps

• The transaction is expected to close in fiscal Q3 2025, subject to customary closing conditions and regulatory approvals.
• Valvoline will develop a long-term integration plan for Breeze Autocare, which may include refranchising certain stores.

Key Dates

Keywords

Valvoline, Breeze Autocare, acquisition, Oil Changers, quick lube, automotive maintenance, network growth, Greenbriar Equity Group, EBITDA, Term Loan B