Diversified Royalty announced that it has entered into a definitive agreement to acquire the franchisor business of Mr. Lube + Tires for an aggregate purchase price of $235 million, subject to customary closing and post-closing adjustments. The acquisition is expected to close on or before the end of Q2 2026, pending regulatory approvals and customary closing conditions.
The transaction will see Diversified Royalty Corp. increase its economic exposure to Mr. Lube + Tires, which it described as its largest and best-performing royalty partner. DIV plans to finance the acquisition through a combination of cash on hand, existing acquisition facility capacity, senior debt, rolled equity from management, and equity issued to certain Mr. Lube + Tires stakeholders.
Founded in 1976 in Edmonton by Cliff Giese, Mr. Lube + Tires operates as Canada’s leading automotive service chain focused on fast, no-appointment-needed vehicle maintenance services. The company now operates 187 locations across Canada, with 186 locations run by franchisees. In addition to oil changes, the business has expanded into tire sales and installations and other automotive services, which now account for the majority of system sales.
Mr. Lube + Tires services more than 2 million Canadian customers annually and generates over $500 million in system sales. The company has also been recognized as one of Canada’s Best Managed Companies for the past thirteen years and has earned recognition for having one of Canada’s Most Admired Corporate Cultures.
DIV said the acquisition represents a strategic opportunity to acquire one of Canada’s leading franchisor businesses while benefiting from continued same-store sales growth and future new store openings. Since DIV’s initial partnership transaction with Mr. Lube + Tires in 2015, same-store sales growth has averaged 7.2% over 10 years. Over the same period, Mr. Lube + Tires has grown adjusted EBITDA at a compound annual growth rate of 14.7%.
The purchase price and transaction costs will be funded through several sources, including $34 million in cash on hand, $41.1 million from DIV’s undrawn acquisition facility, and $212.5 million from a newly established senior credit facility for the purchaser entity. DIV will also issue approximately 3.4 million shares priced at $3.98 per share to various equity holders of Mr. Lube + Tires, while management of Mr. Lube + Tires will roll $20.6 million of equity into the purchaser entity, retaining an approximately 4% ownership interest.
DIV noted that it and its subsidiary ML Royalties Limited Partnership received approximately $34.1 million in royalties and management fees from Mr. Lube + Tires during 2025. The company estimates the combined business will generate approximately $58.7 million in adjusted EBITDA during the 12 months following closing.
Mr. Lube + Tires opened 16 new stores in 2025 and has budgeted 18 additional store openings in 2026, with two already opened. The company is also projecting another 16 new store openings in 2027.
Under the transaction structure, DIV will acquire the remaining operating assets of Mr. Lube + Tires that it does not already own, including franchise agreements and supplier contracts. DIV has owned the trademarks and intellectual property rights associated with Mr. Lube + Tires since 2015 through its subsidiary ML Royalties Limited Partnership.
The existing leadership team of Mr. Lube + Tires is expected to remain in place following the acquisition. Pamela Lee, President and CEO of Mr. Lube + Tires, is expected to join the board of directors of the purchaser entity after closing.
PricewaterhouseCoopers Corporate Finance Inc. acted as exclusive financial adviser to Mr. Lube + Tires and its equity holders for the acquisition.
KEY QUOTES:
“DIV looks forward to completing the Acquisition and increasing its economic exposure to Mr. Lube + Tires, our largest and best performing royalty partner. DIV is keen to work with Mr. Lube + Tires’ management as part of DIV and as equity partners, to continue Mr. Lube + Tires’ impressive growth and build it into Canada’s leading automotive services franchise business. DIV intends to finance the Acquisition with a combination of cash, undrawn acquisition facility capacity, senior debt in the Purchaser, rolled DIV equity and rolled management equity in the Purchaser. As a result, for the second consecutive transaction, DIV will not need to raise equity to complete the Acquisition. DIV estimates that the Acquisition will increase its distributable cash per share from $0.3128 on a run-rate basis to $0.3478 on a pro-forma basis. The Board has decided to take a conservative approach by maintaining the current $0.285 per share annualized dividend, which will provide DIV with financial flexibility to deleverage following closing of the Acquisition.”
Sean Morrison, Chief Executive Officer, Diversified Royalty Corp.
“Over its 50-year history, Mr. Lube + Tires has delivered trusted, convenient automotive maintenance to millions of Canadians who visit its locations each year. Mr. Lube + Tires has been partners with DIV for over 11 years, and we are excited to continue our partnership with DIV and unlock new growth opportunities for our franchisees as we execute on our strategy to become the largest automotive services franchise business in Canada.”
Pamela Lee, President and CEO, Mr. Lube + Tires
