Diversified Royalty Corp acquires Mr. Lube

Diversified Royalty Corp. has agreed to acquire the franchisor business of Mr. Lube + Tires for $235 million. The deal, announced on May 14, 2026, aims to deepen Diversified Royalty's commitment to Canada's automotive services sector by enhancing its stake in one of its highest performing royalty partners.

Diversified Royalty will finance the acquisition through a combination of cash, available acquisition facility capacity, senior debt, and rolled equity both from the company and key stakeholders at Mr. Lube + Tires. Notably, the firm will not need to issue new equity, following a strategy of maintaining financial reserves while expanding its portfolio. The transaction is expected to elevate Diversified Royalty’s distributable cash per share from $0.3128 to $0.3478 on a pro-forma basis. Despite this increase, the company has decided to maintain its annualized dividend at $0.285 per share to ensure financial flexibility post-acquisition.

The acquisition is a strategic move for Diversified Royalty Corp., which sees the potential in Mr. Lube + Tires' economic model — noted for its robust same-store sales growth averaging 7.2% over a decade and a compound annual growth rate in Adjusted EBITDA of 14.7%. Sean Morrison, CEO of Diversified Royalty, highlighted the company’s plan to leverage this growth by supporting Mr. Lube + Tires' management in expanding their footprint across Canada. Pamela Lee, CEO of Mr. Lube + Tires, emphasized the longstanding partnership with Diversified Royalty and is optimistic about pursuing additional growth avenues through the acquisition.

Within the broader automotive services market, this acquisition underscores intensified competition in franchising models, where scalable and consumer-oriented businesses like Mr. Lube + Tires continue to appeal. This move also reflects Diversified Royalty's strategy of focusing on high-performing assets in North America without additional equity dilution, demonstrating a disciplined approach to capital deployment in the services sector.

Looking ahead, the acquisition is subject to customary closing conditions and post-closing adjustments, but it fortifies Diversified Royalty’s position in the sector. The company’s strategy to maintain its current dividend while growing its distributable cash signals a cautious approach to both expansion and shareholder returns, poised for further opportunities in the competitive automotive services industry.