Bridgestone bows out of Pep Boys bidding

Pep Boys sales are lower now than they were in 2006, and profitability has declined in recent years. The Japanese tire manufacturer chose to let a Tuesday deadline for an upgraded offer pass.

Carl Icahn’s Icahn Enterprises L.P. has entered into a definitive agreement with Pep Boys – Manny Moe & Jack (NYSE:PBY) to acquire the automotive after-market retailer in an all-cash transaction.

Icahn Enterprises LP, Icahn’s company, owns another auto-parts business, Auto Plus, so the addition of Pep Boys could strengthen that franchise.

The offer from Icahn Enterprises is not subject to any due diligence, financing or antitrust conditions.

Icahn executives on Monday told the directors of Pep Boys the company will pay $18.50 per share for the Philadelphia-based fix chain. He offered $18.50 per share in cash which is greater than $1 billion in a sweetened bid. “Based on its prior actions, Bridgestone may seek to regain its favored status by merely matching, rather than exceeding the Icahn Enterprises offer, ‘ Efraim Levy, an analyst with S&P Capital IQ, said in a note to clients Tuesday”.

After Bridgestone announced the tender offer in October, Pep Boys’ share price broke above $15 after hovering around $12 since the summer.

Signia Capital Management Llc holds 7.17% of its total portfolio in Pep Boys – Manny Moe & Jack, equating to 177,699 shares. He said: “I am confident in Pep Boys’ strong future growth prospects as an Icahn Enterprises portfolio company”. The company’s stores are organized into a hub and spoke network consisting of supercenters and service & tire centers.

Many are speculating that Icahn is hoping to create synergies between Pep Boys and Canadian auto parts chain Auto Plus, as well as tier-one automotive supplier and parts maker Federal Mogul.

Shares of Pep Boys are heading for their highest point in eight years after the company received yet another offer from activist investor Carl Icahn, putting the deal in the neighborhood of $1 billion.