11/24/2020

Auto Service Company Monro Pushed by Ides to Make Changes

Reuters (11/24/20) Herbst-Bayliss, Svea

Sources say hedge fund Ides Capital is pressuring U.S. car service and tire center operator Monro (MNRO) to make changes, including environmental, social, and governance (ESG) improvements such as diversifying its workforce and board. Ides claims a diversity shortfall and broader ESG issues have prevented Monro from fulfilling its potential. The hedge fund reiterated its concerns to the company's board as recently as October. Monro is currently valued at $1.5 billion, and its stock rose 7.83% on Nov. 24 to close at $48.35. The company said it engages regularly with investors and appreciates their comments. "Promoting a diverse organization is a key pillar of our company and a priority for our Board of Directors," declared a Monro spokeswoman. "Our diversity and inclusion efforts are ongoing and will be an important factor as we formalize our environmental, social, and governance program to better inform our shareholders of our initiatives." Monro's board had been primarily male and white, and had served an average of 17 years, compared to the Standard & Poor's 500 companies' average of 11 years. In August Monro added its first-ever racially diverse director, and its board currently includes two female directors. Ides has requested that Monro publicly disclose its diversity statistics and ESG metrics. Monro's stock price has fallen 43% since January, and in August CEO Brett Ponton departed to become CEO of ServiceMaster Co. The board has been seeking his replacement since then. Ides' lobbying at Monro dovetails with a wave of consolidation in the auto parts and repair sector. Earlier this year Meritage (MTH) acquired Les Schwab Tire Centers, and Golden Gate Capital purchased Express Oil in 2017 and Mavis in 2018. Mavis also announced its planned acquisition of Town Fair Tire Centers last week. Monro is one of the last sizable firms in the industry, and the sources said Ides has encouraged Monro to consider all alternatives to maximize shareholder value while also searching for a new CEO.

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