Pep Boys Agrees To Be Acquired by Icahn
Pep Boys agreed to be acquired by Carl Icahn for more than $1 billion after Bridgestone Corp. backed down from a bidding war with the billionaire investor.
In late-December the auto-parts chain said that it terminated an earlier merger pact with the tire manufacturers and signed a definitive agreement to be bought by Icahn Enterprises for $18.50 a share. Icahn’s investment firm also will pay Bridgestone a $39.5 million termination fee on behalf of Pep Boys.
Icahn’s aggressive bidding reflects optimism in the U.S. auto-parts retailing industry, which stands to benefit from an aging vehicle fleet on American roads. Both companies were seeking to expand their presence in the tire and automotive-repair sector by adding Pep Boys’ 800 locations across more than 30 states.
Bridgestone operates more than 2,200 tire and automotive centers in the U.S. Icahn, meanwhile, plans to combine Pep Boys with the Auto Plus chain, which he acquired on 2015. Analysts have speculated that Icahn may only be interested in Pep Boys’ retail operation and would plan to sell the tire and services division to other interested parties such as Bridgestone.
Bridgestone declined to comment on the company’s next steps, including whether it would seek to buy part of the Pep Boys operations from Icahn.
"Pep Boys has under-performed its peers and may require an overhaul," said James Albertine, an analyst at Stifel Financial Corp. "For the past decade, the company has averaged same-store sales declines of 1.6 percent," he wrote in a report on December 29.
Shares of the auto parts retailer, whose full name is Pep Boys—Manny, Moe & Jack, fell 2.9 percent to $18.39 on December 30. Bridgestone’s shares rose the most in two weeks in Tokyo after the tire maker said it wouldn’t counter Icahn’s $18.50-a-share bid -- a sign investors were relieved the company won’t overpay for the business. Icahn Enterprises had said it would be willing to boost its proposal even further if it needed to.
If Icahn completes the deal for Pep Boys, it will signal a return to his 1980s corporate raider days. Back then, he pursued iconic public companies, including Trans World Airlines (TWA), and made bids for Phillips Petroleum and department store Marshall Field’s, among others.