Diversified Royalty Corp. announced that it, and its newly formed wholly owned subsidiary, have entered into a definitive agreement with Mr. Lube Canada Limited Partnership and Mr. Lube Canada GP Inc. for the strategic acquisition of the Mr. Lube + Tires franchisor business in Canada.

The acquisition is slated for an aggregate purchase price of $235 million, subject to customary closing and post-closing adjustments. Closing of the acquisition is expected to occur on or before the end of Q2 2026.

Currently, franchisees operate 186 of the 187 locations operating across Canada. Mr. Lube + Tires services over 2 million Canadians customers each year, generating over $500 million in system sales.

DIV, through its subsidiary ML Royalties Limited Partnership, has owned the trademarks and intellectual property rights utilized by Mr. Lube + Tires in its business since 2015 and licenses these rights back to Mr. Lube + Tires in exchange for royalty payments.

Pursuant to the Acquisition, DIV will acquire the remaining assets of Mr. Lube + Tires that it does not already own, including, most importantly, Mr. Lube + Tires’ franchise agreements and supplier contracts. The acquisition will not include the head leases to the franchised locations leased by Mr. Lube + Tires and the subleases of these locations which are subleased by Mr. Lube + Tires to its franchisees.

Sean Morrison, Chief Executive Officer of DIV, stated, “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 share1 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.”

Pamela Lee, President and CEO of Mr. Lube + Tires, stated, “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.”

DIV states that the acquisition of Mr. Lube + Tires represents a unique opportunity for it to acquire one of Canada’s leading franchisor businesses. It positions Mr. Lube + Tires economic model as superior: “It’s franchisees are generating market leading economic returns and are keen to continue opening new locations across Canada. Since DIV’s initial transaction in 2015, DIV has benefited primarily from Mr. Lube + Tires’ strong same-store sales growth, which has averaged 7.2% over 10 years.”

Post acquisition, DIV expects to benefit from both continued SSSG and the operating leverage of continued new store openings. In this regard, over the past 10 years, Mr. Lube + Tires has grown its adjusted EBITDA at a compound annual growth rate of 14.7%.

DIV is a leading provider of royalty financing to owners of North American franchisors, and this will continue to be
a primary focus.