#United States #Lexington #Valvoline #Breeze Autocare #Oil Changers

Valvoline Inc. Accelerates Its Growth Strategy

Valvoline Inc. (NYSE: VVV) has taken a significant leap in its expansion plans within the automotive maintenance industry. On February 20, 2025, the company announced its definitive agreement to acquire Breeze Autocare, a well-established operator with nearly 200 stores primarily functioning under the Oil Changers brand across 17 states in the U.S.

This strategic acquisition is set to cost Valvoline approximately $625 million, which will be financed through a newly issued Term Loan B. The approach marks Valvoline's intention to further enhance its footprint in the preventive automotive maintenance sector, aiming to grow its network to over 3,500 locations across North America. Currently, Valvoline boasts more than 2,000 service centers, and with the addition of Breeze Autocare, their total will surmount 2,200.

Breeze Autocare Overview

Breeze Autocare is recognized as an independent provider of quick lube and routine preventive maintenance services. With flexibility in its operations and a commitment to quality service, it generated impressive net sales of $200 million in its most recent financial year. The company’s service model features a focus on customer convenience, allowing clients to remain in their vehicles while receiving maintenance, thereby ensuring a speedy and efficient experience.

The President and CEO of Valvoline, Lori Flees, expressed enthusiasm regarding the acquisition, stating that welcoming Breeze Autocare will strategically enhance their market reach and customer accessibility. She emphasized the alignment in corporate cultures, stating, "This acquisition will accelerate our growth and earnings potential while enhancing our already strong cash flow profile."

Growth and Integration Strategy

Valvoline's proven track record in acquiring and successfully integrating new businesses gives analysts and investors confidence in the potential benefits of this deal. The integration plan for Breeze Autocare is in the making, initially allowing the stores to continue operating under their existing branding, which is crucial for maintaining customer loyalty and operational stability during the transition.

The merger is expected to ultimately unlock long-term synergies, enhance cash flow profiles, and nurture an even more robust market presence for Valvoline across the competitive automotive services landscape. With the robust infrastructures of both companies, the anticipated scaling advantages will provide opportunities for retail-specific technology investments and expansion of fleet sales initiatives.

Financial Outlook

From a financial perspective, the acquisition is poised to deliver top-line sales and profit growth. The financial benefits are notable, as the purchase price represents a multiple of 10.7 times Breeze Autocare's adjusted EBITDA. Valvoline estimates that the transaction will have a relatively neutral effect on its adjusted diluted earnings per share (EPS) in the first year, subsequently becoming accretive over time.

In preparation for this acquisition, Valvoline plans to streamline its share repurchase activities and aims to achieve a rating agency adjusted net leverage ratio of between 2.5x to 3.5x within a 24-month post-acquisition timeframe.

Looking Forward

The closing of this transaction is anticipated in fiscal Q3 2025, contingent on the usual closing conditions and necessary regulatory approvals. As Valvoline paves the way for a more extensive operational network, it reaffirms its steadfast commitment to providing exceptional customer service and quality automotive maintenance. The acquisition of Breeze Autocare represents a pivotal point in Valvoline's ongoing effort to solidify its status as a leader in the industry.

By leveraging their combined strengths, Valvoline and Breeze Autocare are set to redefine the customer experience, stacking their expertise and operational efficiencies to cater better to the evolving needs of vehicle maintenance consumers. Such strategic moves are vital for maintaining competitiveness in a rapidly evolving market, especially amid increasing consumer reliance on preventative maintenance services.