Carl Icahn returns to a familiar sector — auto repair —as he builds a 15% stake in Monro

Company: Monro (MNRO)

Business: monroFormerly known as Monro Muffler Brake, it operates in the United States providing automotive subcar repair and tire services. The company offers a variety of services regarding braking in passenger cars, light trucks and vans; mufflers and exhaust systems; and steering, drivetrain, suspension and wheel alignment. It also offers tires and routine maintenance services, which include government inspections. Provides repair and replacement of parts. Their shops offer a variety of undercar repair services for brakes, steering, mufflers and exhaust systems, suspension and wheel alignment, as well as tire replacement and service. It also offers planned maintenance services in its stores, which are packaged according to the year, brand, model and mileage of each vehicle and offered to consumers. Maintenance services include oil change services, heating and cooling system flush and fill service, fuel system service and transmission flush and fill service.

Stock Market Value: $458.40 million ($15.27 per share)

Activist: Carl Icahn

Ownership: 14.79%

Average Cost: $19.08

Activist Comment: Carl Icahn is the grandfather of shareholder activism and the true pioneer of strategy. He is passionate about shareholder rights and good corporate governance and will go to extreme lengths to combat incompetent boards and overpaid executives. Icahn has invested in all industries throughout his six-decade-plus career and has a long history in the automotive parts and services industry. He has participated in various mergers and acquisitions in this field, acquiring some of his portfolio companies through Icahn Automotive, the automotive segment business of his holding company. Icahn Companies. This includes its acquisition of Pep Boys-Manny Moe and Jack in 2016 and Federal Mogul in 2017.

what’s going on

On November 5, Carl Icahn filed a 13D with the U.S. Securities and Exchange Commission, revealing Monro’s 14.79% position.

behind the scenes

Monro provides automotive sub-vehicle repair and tire services in the United States, operating more than 1,100 repair shops and tire dealerships in 32 states under multiple regional brands. The company has faced many challenges in recent years. Macro factors such as low consumer demand, high material and labor costs, and the trend of consumers shifting to lower-margin tire products have created significant margin and growth pressures. As a result, following a 4.9% decline in sales in fiscal 2025 (the second consecutive significant decline in revenues), the company announced that it would close approximately 145 underperforming locations.

Recently, the company’s third-quarter earnings report left many investors disappointed about the strategic shift, with weaker-than-expected revenue and a lack of any specific financial guidance for the upcoming fiscal year. Shares fell 16.7% the next day. Finally, many investors have questioned the company’s dividend payout ratio, which remains relatively high despite ongoing struggles.

Putting all this together, it’s little surprise that shares underperformed, falling 44.73%, 66.73%, and 63.25%, respectively, over the last 1, 3, and 5-year periods before Icahn’s announcement.

Perhaps this depressed valuation caught Carl Icahn’s attention. He declared a 14.79% position in the company (67% purchased since the stock’s October 29 pullback) and the stock immediately rose over 15%.

Although there are plenty of cheap stocks, this isn’t Icahn taking a brochure on the auto industry. Icahn has a rich history in the automotive parts and services industry, particularly Icahn Automotive, the automotive segment of his conglomerate, Icahn Enterprises. Icahn knows this industry well and likely sees Monro as a great business that is vastly undervalued.

The timing of this public participation is also quite remarkable. It’s not just the stock’s recent decline that makes this a good entry point for an investor like Icahn. Monro recently agreed to collapse the dual-class share structure that previously gave sole Class C shareholder Peter Solomon veto power over any matter put to a vote by shareholders, effectively making it a controlled company. Based on its approval in 2023, this collapse would occur before the 2026 annual meeting, which is expected to take place next August.

So what does this mean for the company’s shareholders? It effectively paves the way for the transformation of the company from a privately operated company to a publicly traded company for the benefit of its shareholders. With one person having veto power over all major board decisions, the rest of the board becomes somewhat irrelevant. With this transformation, the company has the opportunity to have a true, collaborative and productive board of directors. This would require a restructuring of it, and we know of no one better or more experienced than Icahn for this endeavor.

Solomon is a well-known 87-year-old investment banker, and Icahn is a contemporary of Icahn and Solomon. However, there is no evidence that the two crossed paths.

Despite this, we imagine that they have many common relationships and mutual respect for each other. While there are many different ways this campaign could succeed, what we want to see is two elder statesmen meet in a room, with an air of civility and friendliness unusual in the average activist engagement, and together create a board that will oversee management, hold them accountable on behalf of shareholders, and lead the company into its first real phase as a truly public company. With Solomon already agreeing to give up control and neither Solomon nor Icahn likely to be on the ongoing board, there’s no reason for this to become moot.

But we must also address the elephant in the room. Icahn built the auto industry on acquisitions, and Monro seems to fit in well with IEP’s automotive business.

Icahn launched activist campaigns at some of the auto companies he later acquired, including Pep Boys-Manny Moe and Jack in 2016 and Federal Mogul in 2017. When Icahn acquired Pep Boys, he also stated: “We believe that with our abundant resources and industry knowledge, we can grow this business and take advantage of consolidation opportunities, thereby benefiting our customers, manufacturing partners and employees as well as our shareholders.”

While we sincerely believe that Icahn’s main motivation for this investment is to invest in a good company that he believes is at an inflection point and significantly undervalued, there is always the chance that he may want to own the entire company one day. It’s a very small position for him and a good return wouldn’t move the needle as much as a synergistic integration into the automotive business, but we see no reason why neither wouldn’t be true.

Ken Squire is the founder and president of 13D Monitor, a corporate research service on shareholder activism, and the founder and portfolio manager of the 13D Activist Fund, an investment fund that invests in a portfolio of activist investments.