Meritage, the investment firm that acquired the Les Schwab Tire Centers chain, reportedly wants to sell it at an enterprise value of more than $7 billion including debt. Sources informed on condition of anonymity said Meritage has hired Goldman Sachs to handle the sale. The move is expected to attract interest from private distributors and other tire-selling companies. Interviews with the market participants, whose identities were not disclosed because negotiations are still at a rather delicate stage, revealed that a sale is not guaranteed.
Mohamed El-Erian; Meritage Group – Nat Simons, the billionaire who founded the company after leaving Renaissance Technologies in 1997, bought Les Schwab Tire from the Schwab family in 2020 for the hefty sum of $3 billion. Goldman Sachs and Les Schwab Tire declined to comment on the sale, and Meritage Group and Nat Simons did not see fit to comment on the matter.
A company called Les Schwab Tire was founded in Bend, Central Oregon, and has over 500 locations in 13 western states. In total, the company employs over 7,000 people. Such a company, with annual EBITDA revenue of about $500 million, could expect a valuation of about 15 times EBITDA, according to sources.
Founded in 1952 by Les Schwab, the tire retailer is one of the largest in the United States, competing with other private sector companies such as Mavis Tire and Discount Tire. The industry is dominated by the tire and auto service sector and remains popular with private equity firms due to its relatively stable cash flows, which are considered relatively insulated from turbulent economic periods and the threat of a shift to online shopping.
Recently, private equity has increased its activity in the tire industry, most notably BayPine and TSG Consumer Partners purchased Mavis Tire for more than $6 billion in 2021.
Meritage Group manages approximately $12 billion in assets and invests in a variety of sectors, including public and private equity, credit and real estate, with offices in New York City, San Francisco and Greenwich, Connecticut.
