ROCHESTER, NY — Monro Muffler Brake announced today it has acquired a 13 percent stake in R & S Parts and Service, Inc., a privately owned automotive aftermarket parts and service chain, for approximately $2 million, from GDJ Retail LLC. 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 percent 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. The transaction will be funded through Monro’s existing credit facility and is expected to be relatively neutral to the bottom line this fiscal year.
R & S operates 101 retail stores under the name of Strauss Discount Auto that provide automotive parts and accessories, 71 of which 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.
“Our investment in R & S furthers our strategy to be the dominant automotive aftermarket service provider within our current 17 state footprint. 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,” said Robert Gross, president and CEOs of Monro Muffler Brake, Inc.
“I’m very pleased that Monro Muffler has decided to make an investment in Strauss, its employees and our future. In addition to providing growth capital, Monro’s resources and talent will allow us to take better advantage of the opportunities in the marketplace and enhance our profitability,” said Glenn Langberg, CEO of R & S Parts and Service.
Monro also has the option to purchase an additional 20 percent stake in Strauss on or before March 31, 2006 for a cash payment of $3 million. If the company decides to make this investment, it will have the opportunity to buy the remaining 67 percent of Strauss for $9 million cash plus $1 million of Monro stock anytime prior to April 1, 2007.
Today, President and CEO, Rob Gross and Chief Financial Officer, Cathy D’Amico will be speaking at the 29th Annual Gabelli Automotive Aftermarket Symposium in Las Vegas and the JP Morgan Small Cap Conference in Boston, respectively. During their web cast presentations, Mr. Gross and Ms. D’Amico will address the recent investment as well as provide an update on October comparable store sales, which were up approximately 2 percent as compared to the same period last year. Additionally, comparable store sales for the second half of October and first week in fiscal November showed progressive improvement as compared to the first half of October.
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