Quick Lubes store acquisitions
During the three months ended December 31, 2020, the Company acquired 81 service center stores in single and multi-store transactions, including 27 former franchise locations converted to company-owned service center stores and 12 franchise-operated service center stores, for an aggregate purchase price of $218 million. These acquisitions expanded Valvoline's Quick Lubes system in key markets to more than 650 and 1,500 company-owned and system-wide service center stores, respectively, and included:
•Fourteen company-owned service center stores in Texas acquired from Kent Lubrication Centers Ltd. (doing business as Avis Lube) on October 1, 2020;
•Twenty-one former franchise locations converted to company-owned service center stores in Kansas and Missouri acquired from Westco Lube, Inc. on October 15, 2020;
•Twelve company-owned service center stores in Idaho acquired from L&F Enterprises (doing business as Einstein's Oilery) on October 30, 2020; and
•Twenty-seven Mister Oil Change Express® locations across seven states (15 company-owned and 12 franchise-operated) acquired from Car Wash Partners, Inc. on December 11, 2020.
During the three months ended December 31, 2019, the Company acquired nine service center stores in single and multi-store transactions, including two former franchise locations converted to company-owned service center stores, for a total of $6 million.
The Company’s acquisitions are accounted for as business combinations. A summary follows of the aggregate cash consideration paid and the total assets acquired and liabilities assumed for the three months ended December 31:
|Inventories||$||2 ||$||— |
Property, plant and equipment (a)
|79 ||— |
|Operating lease assets||23 ||— |
|175 ||5 |
Intangible assets (c)
Reacquired franchise rights (d)
|33 ||1 |
|Other||3 ||— |
Other current liabilities (a)
|Operating lease liabilities||(21)||— |
Other noncurrent liabilities (a)
|Net assets acquired||$||218 ||$||6 |
(a)Includes $73 million of finance lease assets in property, plant and equipment and finance lease liabilities of $3 million and $70 million in other current and noncurrent liabilities, respectively, for leases acquired during the three months ended December 31, 2020.
(b)Goodwill is generally expected to be deductible for income tax purposes and is primarily attributed to the operational synergies and potential growth expected to result in economic benefits in the respective markets of the acquisitions.
(c)Intangible assets acquired during the three months ended December 31, 2020 and 2019 have weighted average amortization periods of 11 and six years, respectively.
(d)Prior to the acquisition of former franchise service center stores, Valvoline licensed the right to operate franchised quick lube service centers, including use of the Company’s trademarks and trade name. In connection with these acquisitions, Valvoline reacquired those rights and recognized separate definite-lived reacquired franchise rights intangible assets, which are being amortized on a straight-line basis over the weighted average remaining term of approximately 11 years for the rights reacquired in fiscal 2021. The effective settlement of these arrangements resulted in no settlement gain or loss as the contractual terms were at market.
The fair values above are preliminary for up to one year from the date of acquisition as they may be subject to measurement period adjustments if new information is obtained about facts and circumstances that existed as of the acquisition date. The Company does not currently expect any material changes to the preliminary purchase price allocations for acquisitions completed during the last twelve months.