Diversified Royalty Corp acquires Mr. Lube

Diversified Royalty Corp. has agreed to acquire the franchisor operations of Mr. Lube + Tires, Canada's leading automotive service chain, for $235 million. The deal, which expands Diversified Royalty's exposure to its largest royalty partner, is expected to close by the end of the second quarter of 2026. Completion hinges on regulatory approval and customary closing conditions.

Diversified Royalty will employ a multi-faceted financing strategy to fund the acquisition. The $235 million price tag will be covered through a combination of $34 million in existing cash reserves, $41.1 million from its undrawn acquisition facility, and the establishment of a $212.5 million senior credit facility. Additionally, approximately 3.4 million shares will be issued at $3.98 each to certain stakeholders of Mr. Lube + Tires. Management from Mr. Lube will also roll $20.6 million of equity into the new ownership structure, maintaining roughly 4% stake in the business.

Mr. Lube + Tires, founded in Edmonton in 1976, operates 187 locations across Canada, predominantly franchised, and logs system sales exceeding $500 million annually. The company has shown robust growth with an average same-store sales increase of 7.2% over the past decade and an adjusted EBITDA growth rate of 14.7% annually. This acquisition marks a strategic opportunity for Diversified Royalty to fully integrate its current partnership, having owned the trademarks and intellectual property since 2015, and leverage the franchisor's operational successes and expansion plans.

In the broader context of the automotive services industry, the acquisition underscores a trend towards consolidation as companies seek scale to enhance service capabilities and economies. Rival firms in the sector may face increased competitive pressures with Mr. Lube + Tires coming under the comprehensive management of Diversified Royalty. The acquisition will also enable Diversified Royalty to capitalize on anticipated same-store sales growth and further store expansion, with Mr. Lube planning 18 new openings in 2026 and 16 more projected for 2027.

The existing leadership of Mr. Lube + Tires is expected to continue post-acquisition, ensuring continuity in operations, while its President and CEO, Pamela Lee, is slated to join the board of the purchasing entity. As the deal progresses, attention will pivot to regulatory approvals, which could shape the timing and finalization of the transaction.