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CHARLOTTE, N.C. - Driven Brands Holdings Inc. (NASDAQ: DRVN), a leading automotive services provider with a market capitalization of $2.58 billion, has completed the sale of its U.S. car wash operations to Express Wash Operations, LLC, doing business as Whistle Express Car Wash. The stock has shown resilience, gaining over 20% in the past six months according to InvestingPro data. The transaction, which was finalized today, marks a strategic shift for Driven Brands to concentrate on its Take 5 Oil Change brand and other franchise businesses.
The sale to Whistle encompassed a $255 million cash payment and a $130 million interest-bearing seller note, subject to customary post-closing adjustments. The cash from the sale is earmarked for debt reduction, with Driven Brands aiming to achieve a net leverage ratio of 3x or lower by the end of 2026. This debt reduction strategy is particularly significant given the company's current debt-to-equity ratio of 6.72x and total debt of $4.08 billion.
Jonathan Fitzpatrick, President and CEO of Driven Brands, stated, "The completion of this transaction marks an important milestone for Driven Brands, enabling us to focus on our industry-leading Take 5 Oil Change business underpinned by our stable, cash-generating franchise businesses." He expressed gratitude to those who facilitated the deal and expressed confidence that the divestiture will enhance the company's ability to pursue strategic initiatives.
In the fiscal year 2025, Driven Brands plans to report the results of the sold car wash business as discontinued operations. William Blair & Company, L.L.C. acted as the financial advisor, and Latham & Watkins LLP served as legal advisor for the transaction.
Driven Brands, headquartered in Charlotte, North Carolina, is the parent company of various automotive service businesses including Take 5 Oil Change, Meineke Car Care Centers, Maaco, 1-800-Radiator & A/C, Auto Glass Now, and CARSTAR. By the end of Fiscal Year 2024, the company managed 5,200 locations across 14 countries and serviced around 70 million vehicles, generating approximately $2.3 billion in annual revenue from $6.5 billion in system-wide sales.
The news of this sale is based on a press release statement and contains forward-looking statements regarding the company's future operations and financial position. These statements are subject to various risks and uncertainties, and actual results may differ materially from those projected. InvestingPro analysis indicates that Driven Brands is currently undervalued, with additional insights available in the comprehensive Pro Research Report, which offers deep-dive analysis of the company's financial health, growth prospects, and market position.
In other recent news, Driven Brands Holdings Inc. has announced the sale of its U.S. car wash business to Whistle Express Car Wash for approximately $385 million. This divestiture is part of a strategic move to concentrate on the company's core operations, particularly the Take 5 Oil Change brand and its franchise businesses. The transaction is expected to close in the second quarter of 2025, with Driven Brands planning to use the cash proceeds primarily for debt reduction. In light of this development, BMO Capital Markets has raised its price target for Driven Brands to $16.00, maintaining a Market Perform rating.
Additionally, the company has restructured its segment reporting to provide a clearer view of its operations, effective from the first quarter of 2025. This reorganization highlights the Take 5 Oil Change as a separate segment, emphasizing its significance as a growth driver. Driven Brands has also extended its $300 million revolving credit facility to 2030, with specific covenants in place to ensure financial stability.
Stifel analysts have maintained a Buy rating and a $22.00 price target for Driven Brands, reflecting confidence in the company's strategy and future earnings potential. The analysts have affirmed their earnings per share estimates for fiscal years 2025 and 2026, aligning with the company's new reporting structure. These developments collectively indicate a strategic focus on growth and operational efficiency for Driven Brands.
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