Diversified Royalty to buy Mr. Lube + Tires franchisor business for $235M
What's the deal? Diversified Royalty Corp. (DIV) has agreed to acquire the franchisor business of Mr. Lube + Tires for US$172.3M. The deal, announced on May 15, is expected to close by the end of Q2 2026, pending regulatory approvals.
DIV already owns the trademarks and intellectual property rights associated with Mr. Lube + Tires through a subsidiary, having first partnered with the chain in 2015. This acquisition gives it the remaining operating assets — franchise agreements and supplier contracts — making it a full takeover of the franchisor side.
Mr. Lube + Tires, founded in 1976 in Edmonton, is Canada's largest automotive service chain focused on fast, no-appointment-needed vehicle maintenance. It operates 187 locations across Canada, nearly all franchised, serves more than two million customers annually, and generates over US$366.7M in system sales.
Why now? The numbers make a compelling case. Since DIV's initial 2015 partnership, Mr. Lube + Tires has averaged 7.2% same-store sales growth over 10 years and grown adjusted EBITDA at a 14.7% compound annual growth rate. DIV described the chain as its largest and best-performing royalty partner.
The company is also in expansion mode: 16 new stores opened in 2025, 18 are budgeted for 2026 (two already open), and 16 more are projected for 2027. DIV estimates the combined business will generate roughly US$43M in adjusted EBITDA in the 12 months after closing.
What could go wrong? The financing is complex. DIV plans to fund the deal through US$24.9M in cash on hand, US$30.1M from its existing acquisition facility, and US$155.8M from a newly established senior credit facility. It will also issue approximately 3.4 million shares at US$2.92 per share to Mr. Lube + Tires equity holders, and Mr. Lube + Tires management will roll US$15.1M of equity into the purchaser entity, retaining about 4% ownership.
That's a lot of debt for a royalty company. If same-store sales growth slows or new store openings underperform, the leverage could weigh heavily.
The signal: Royalty companies are increasingly moving beyond passive income streams into full franchisor ownership. By absorbing the operating business it already partially owned, DIV is betting that deeper control over a proven franchise model — in a recession-resistant category like car maintenance — will deliver stronger, more predictable returns than royalties alone.
Read more: pulse2.com
