Driven Brands Announces Agreement to Divest U.S. Car Wash Business for $385 Million

Rhea-AI Summary

Driven Brands (NASDAQ: DRVN) has announced an agreement to sell its U.S. car wash business to Whistle Express Car Wash for $385 million. The transaction includes $255 million in cash and a $130 million interest-bearing seller note, with closing expected in Q2 2025.

According to Jonathan Fitzpatrick, President and CEO, this strategic divestiture will allow Driven Brands to reduce debt and enhance focus on its growing Take 5 Oil Change brand and stable franchise operations. The company plans to use proceeds primarily to pay down debt, working toward achieving 3x or less net leverage by the end of 2026.

The decision follows a strategic review of value-maximizing options for the U.S. car wash business. Driven Brands will provide additional information about the transaction and 2025 guidance during its fourth quarter and full year 2024 earnings call.

Positive

• Sale of U.S. car wash business for $385 million
• Proceeds will be used to reduce debt
• Strategic focus on growing Take 5 Oil Change brand
• Working toward 3x or less net leverage by end of 2026
• Transaction expected to close in Q2 2025

Negative

• Divestiture of a business segment indicates strategic shift
• Full payment includes $130 million as seller note rather than immediate cash
• Transaction not closing until Q2 2025

Insights

Financial Analyst

Driven Brands' $385 million divestiture of its U.S. car wash business represents a strategic pivot that will significantly impact the company's financial structure and business focus. This transaction—comprising $255 million in cash and a $130 million seller note—amounts to approximately 15.7% of Driven's $2.45 billion market cap, making it a material transaction for the company.

The deal's structure reveals important nuances about both the market conditions and Driven's priorities. The inclusion of a substantial seller note rather than an all-cash transaction suggests potential challenges in achieving the desired valuation in the current market. This financing arrangement shifts some risk back to Driven Brands, as the full value realization depends on Whistle's future performance and ability to service the note.

From a balance sheet perspective, this move aligns perfectly with management's stated goal of reducing leverage to 3x or below by 2026. The car wash segment is notably capital-intensive, requiring substantial ongoing investment in equipment, real estate, and water management systems. By divesting this division, Driven not only receives immediate cash to pay down debt but also removes a capital-hungry business from its portfolio.

The strategic shift toward focusing on Take 5 Oil Change and franchise brands indicates a preference for business models with higher margins and less capital intensity. Franchise operations typically generate more predictable cash flows through royalty and licensing fees while requiring less direct capital investment from the parent company. Meanwhile, the Take 5 Oil Change quick-service model offers operational efficiencies and cross-selling opportunities that may deliver superior returns compared to the car wash business.

This transaction should be viewed within the broader context of consolidation in the fragmented car wash industry, where private equity firms and strategic buyers have been actively acquiring operations to build scale. For Driven Brands, the decision to exit this segment suggests management believes shareholder value is better served through debt reduction and focusing on their core competencies rather than competing in the increasingly competitive car wash space.

The timing of this announcement alongside earnings indicates management's confidence that this strategic realignment will be well-received by investors and potentially offset any challenging aspects of their quarterly results. The deliberate focus on debt reduction rather than reinvestment signals a conservative approach to capital allocation in the current economic environment.

CHARLOTTE, N.C.--(BUSINESS WIRE)-- Driven Brands Holdings Inc. (NASDAQ: DRVN) (“Driven Brands” or the “Company”), the largest automotive services company in North America, today announced that it has entered into a definitive agreement to sell its U.S. car wash business to Express Wash Operations, LLC dba Whistle Express Car Wash (“Whistle”) for $385 million.

“This transaction will enable Driven Brands to reduce debt and enhance our focus on our growing Take 5 Oil Change^® brand and our stable, cash-generating franchise brands,” said Jonathan Fitzpatrick, President and Chief Executive Officer. “This decision follows a deliberate and thoughtful strategic review of value-maximizing options for the U.S. car wash business, and we are confident it will better position the Company to execute on our strategic initiatives and deliver long-term value to our shareholders.”

Cash proceeds from the transaction will be used primarily to pay down debt as Driven Brands works to achieve 3x or less net leverage by the end of 2026.

Under the terms of the agreement, Whistle has agreed to pay Driven Brands $255 million in cash and deliver to Driven Brands an interest-bearing seller note in the principal amount of $130 million, subject to customary adjustments. The transaction is expected to close in the second quarter of 2025, subject to customary closing conditions.

Mr. Fitzpatrick added, “On behalf of the Board of Directors and leadership team, I thank our U.S. car wash team members for their ongoing hard work and commitment to serving our customers. We also appreciate the loyalty of our customers and expect a smooth transition for all stakeholders.”

Driven Brands will provide additional information about the transaction and 2025 guidance on its fourth quarter and full year 2024 earnings call scheduled for today.

Advisors

William Blair & Company, L.L.C. is serving as financial advisor to Driven Brands, and Latham & Watkins LLP is serving as legal advisor.

About Driven Brands

Driven Brands™, headquartered in Charlotte, NC, is the largest automotive services company in North America, providing a range of consumer and commercial automotive services, including paint, collision, glass, vehicle repair, oil change, maintenance and car wash. Driven Brands is the parent company of some of North America's leading automotive service businesses including Take 5 Oil Change^®, Take 5 Car Wash^®, Meineke Car Care Centers^®, Maaco^®, 1-800-Radiator & A/C^®, Auto Glass Now^®, and CARSTAR^®. Driven Brands has approximately 5,200 locations across 13 countries, and services approximately 70 million vehicles annually. Driven Brands’ network generates approximately $2.3 billion in annual revenue from approximately $6.5 billion in system-wide sales.

Disclosure Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are generally identified by the use of forward-looking terminology, including the terms “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “likely,” “may,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and, in each case, their negative or other various or comparable terminology. All statements other than statements of historical facts contained in this press release, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management, and expected market growth are forward-looking statements. In particular, forward-looking statements include, among other things, statements relating to: (i) the completion of the Transaction, including Purchaser’s ability to obtain the required financing; (ii) our ability to realize the value of the seller note; (iii) potential post-closing obligations and liabilities; (iv) our strategy, outlook and growth prospects; (v) our operational and financial targets and dividend policy; (vi) general economic trends and trends in the industry and markets; and (vii) the competitive environment in which we operate. Forward-looking statements are not based on historical facts but instead represent our current expectations and assumptions regarding our business, the economy and other future conditions, and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. It is not possible to predict or identify all such risks. These risks include, but are not limited to, the risk factors that are described under the section titled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 30, 2023 and in our other filings with the Securities and Exchange Commission, which are available on its website at www.sec.gov. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250225520090/en/

Shareholder/Analyst inquiries:

Dawn Francfort

ICR, Inc.

investors@drivenbrands.com

(203) 682-8200

Media inquiries:

Taylor Blanchard

taylor.blanchard@drivenbrands.com

(704) 644-8129

Source: Driven Brands

FAQ

What is the value of Driven Brands' U.S. car wash business sale to Whistle Express?

Driven Brands (DRVN) is selling its U.S. car wash business to Whistle Express Car Wash for $385 million, consisting of $255 million in cash and a $130 million interest-bearing seller note.

How will DRVN use the proceeds from the car wash business sale?

DRVN will primarily use the proceeds to pay down debt as part of its strategy to achieve 3x or less net leverage by the end of 2026.

When is the DRVN car wash business sale expected to close?

The transaction is expected to close in the second quarter of 2025, subject to customary closing conditions.

What is Driven Brands' strategic focus after selling its car wash business?

After the divestiture, DRVN will focus on its growing Take 5 Oil Change brand and its stable, cash-generating franchise brands.

Who are the advisors for DRVN's car wash business sale?

William Blair & Company, L.L.C. is serving as financial advisor to Driven Brands, and Latham & Watkins LLP is serving as legal advisor for the transaction.