Icahn ups Bid for Pep Boys (PBY) to $18.50 per Share

Shares of Pep Boys (PBY) were trading up +1.13 or +6.49 percent to $18.54 per share in Tuesday’s premarket after news that investor Carl Icahn had sweetened his offer for the company from a previous bid of $16.50 to $18.50 per share. Pep Boys stock closed at $17.41, down -0.10 or -0.57 percent in Monday’s regular trading session.

The Pep Boys: Manny, Moe & Jack generally abbreviated as Pep Boys, was founded in 1921 by four friends who chipped in $200 apiece to open an auto parts store in Philadelphia, Pennsylvania where the company continues to be headquartered.
Since then, Pep Boys has expanded into a full service automobile parts aftermarket retail chain. The company operates more than 800 stores and 7,500 service bays for auto repair in 35 United States and Puerto Rico. The chain sells all types of branded and private label car accessories including tires. One fifth of Pep Boys is still owned by the Strauss and Rosenfeld families, two of the original founding partners.

Pep Boys has been in a bidding war since Bridgestone Retail Operations, LLC (BSRO), a wholly owned subsidiary of Tokyo based Bridgestone Tire entered a $15.00 per share bid or approximately $835 million on the company in late October. Earlier this month, activist investor Carl Icahn countered the Bridgestone offer bidding $16 per share, and subsequently sweetening the offer to $16.50. Bridgestone countered the offer with a $17 per share bid last week, which was accepted by Pep Boys.

The latest bid for $18.50 per share values Pep Boys in excess of $1 billion. The Pep Boys board announced in a news release yesterday that it had determined the Icahn offer was superior to Bridgestone’s and will pay a termination fee to Bridgestone to end their agreement. Bridgestone must meet a deadline of Thursday at 5pm EST to respond to the latest offer before Pep Boys terminates the deal.

Last Thursday, Pep Boys had agreed with Bridgestone on the $17 per share offer, meeting the deadline to beat Icahn’s previous $16.50 share bid. Pep Boys said at the time that it had increased the amount of the breakup fee with Bridgestone from $35 million to $39.5 million. Icahn Enterprises countered by offering to pay $0.10 per share above any Bridgestone offer up to $18.10 per share.

In a securities filing yesterday, Icahn Enterprises LP said that “it could be willing to bid in excess of $18.50 per share,” adding, “However, Icahn Enterprises … does not intend to bid any higher than $18.50 per share if [Pep Boys] agrees to any increase of Bridgestone’s termination fee.”

Pep Boys stock has soared since Bridgestone’s original offer of $15 in October. The stock was previously trading just over $12 per share before the original Bridgestone bid. Since Icahn has entered the bidding war, the company’s valuation has exceeded $1 billion and could rise if Bridgestone counters the latest offer. Pep Boys stock is already trading at a premium of the $18.50 offer and will remain in play through the Thursday deadline.

Other News About PBY

Pep Boys Reports Third Quarter 2015 Results

Company reported a net profit of $0.02 per share or $1.3 million in the company’s latest quarter.

What Attracted Bridgestone to Pep Boys?

Video report on the Bridgestone offer and subsequent counteroffers.
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Published on Dec 29, 2015
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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