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.
The auto-parts chain said on Wednesday that it terminated an earlier merger pact with Bridgestone 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 earlier this year. 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.
Fusamaro Iijima, a spokesman for 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 underperformed 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 Tuesday.
Shares of the auto retailer, whose full name is Pep Boys—Manny, Moe & Jack, fell 3 percent to $18.38 as of 11:36 a.m. on Wednesday. The stock had gained 93 percent this year, largely driven by the bidding war.
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, and made bids for Phillips Petroleum and department store Marshall Field’s, among others.
His last big deal that came out of his stance as an activist investor was for oil refinery CVR Energy Inc., when shareholders tendered into his $30-a-share offer in May 2012. The deal was valued at $2.6 billion at the time. Icahn had criticized management and said the company should sell assets.
Since then, Icahn Enterprises has mostly focused on private equity-style acquisitions or investing. One of those deals may be the impetus for his bid for Pep Boys: Icahn’s holding company bought the U.S. automotive parts distribution business of Uni- Select USA Inc. and Beck/Arnley Worldparts Inc. this year for $340 million.
--With assistance from Paula Schaap.