Pep Boys Sold: Icahn Enterprises Purchases Company After Bridgestone Declines To Counteroffer

Pep Boys purchased by Carl Icahn

The Pep Boys’ bidding war between Carl Icahn and Bridgestone is finally over, after weeks of back and forth competition. The struggling auto parts retailer will be sold to the diversified holding company, Icahn Enterprises, in a deal worth roughly $1 billion.

In a related Inquisitr report, Carl Icahn attempted to save another failing business. Last year, the active investor was looking to work out a deal to stop the closing of the Trump Taj Mahal casino in Atlantic City.

Icahn Enterprises will own Pep Boys in 2016.
For the last month, Japanese tire maker Bridgestone and Icahn Enterprises have been trading higher and higher bids to buy Pep Boys. After consulting with legal and financial advisers, the auto services chain announced it is going with Icahn’s offer and terminating negotiations with Bridgestone.

As reported by the New York Times, the agreement announced on Wednesday revealed Pep Boys will sell to Icahn Enterprises in an all-cash deal for $18.50 a share. The transaction is expected to be completed in the first quarter of 2016. After years of struggling to maintain profitability, the auto parts retail chain put itself up for sale earlier this year.

After initially offering to buy Pep Boys for $15 a share in October, Bridgestone was forced to raise its bid twice following counteroffers by Icahn. On Monday, when the New York City-based holding company raised the bid once again, Bridgestone decided it was time to call it quits.

If Bridgestone would have countered again, Icahn Enterprises said it was still willing to pay more if needed. Previously, the highest cash bid from the tire company was $17 per share, or $950 million.

Scott P. Sider, Pep Boys’ chief executive, said the deal “provides new opportunities for Pep Boys employees and allows Pep Boys to benefit from the significant expertise and resources of Icahn Enterprises.”

In June, Icahn bought Auto Plus, another auto parts chain store, from Canadian parts distributor Uni-Select Inc. According to the billionaire, the acquisition of Pep Boys will significantly benefit both companies.

“We have been actively looking for an excellent synergistic acquisition opportunity like Pep Boys, which has enormous growth potential, strong brand recognition, and well-known, best-in-class customer service.”

Even prior to Pep Boys being sold, both Bridgestone and Icahn Enterprises were on the move to expand their presence in the auto repair and service industry. According to Efraim Levy with S&P Capital IQ, the auto parts and servicing industry will continue to grow as people are keeping their cars longer and driving more.

Auto Plus is an auto parts distributor to professional service dealers and has about 270 U.S. locations. It represents brands such as ACDelco auto parts and Valvoline motor oils, as well as some private-label brands. Since acquiring it, Icahn Enterprises has taken in about $173 million in sales from the auto parts company.

Pep Boys has 800 locations in over 30 states and Puerto Rico. The auto parts chain, whose full name is Pep Boys – Manny, Moe, & Jack, sells everything automotive, from tires to air fresheners, in addition to offering repair and maintenance services. Some locations carry the name Discount Tire, Big 10, and Florida Tire.

Operating under the Firestone Complete Auto Care name, Bridgestone has more than 2,200 automotive centers in the U.S., and wanted to buy Pep Boys to increase its retail network. The tire maker also operates stores under the Hibdon and Wheel Works brands.

Bridgstone loses bid to buy Pep Boys.
Some financial experts speculate that Icahn is building up the Pep Boys’ operation with plans to ultimately sell the auto service division. For the last 10 years, Pep Boys’ same-store sales declined an average of 1.6 percent and is in need of an overhaul, according to a report by James Albertine of Stifel Financial.

At the end of business Wednesday, the stock price of Pep Boys closed at $18.39, or 2.9 percent lower than Icahn’s winning bid. Meanwhile, Icahn Enterprises finished the day at $60.19 a share, a 33.5 percent decline so far this year.

In addition to Auto Plus, Icahn’s holding company also owns an 82 percent stake in auto parts maker Federal-Mogul Holdings Corp. Now that Pep Boys has been sold, Icahn Enterprises will pay a $39.5 million termination fee to Bridgestone.

[Photo by AP Photo/Richard Drew]