By on December 8, 2015

After disclosing that he had purchased a 12-percent stake of the company, billionaire investor Carl Icahn submitted an offer of $863 million for the Pep Boys chain of automotive parts stores, according to the New York Times.

Icahn’s offer Tuesday of $15.50 per share is higher than Bridgestone’s offer of $15 per share in October for the chain of 800 stores. The Japanese tire giant offered to buy the chain to add to its 2,200 stores including Tires Plus, Firestone Complete Auto Care, Hibdon Tires Plus and Wheel Works to make one of the largest parts, tire and service chains in the U.S.

Pep Boys’ deal with Bridgestone included a $35 million breakup fee, according to the Wall Street Journal, which Icahn is willing to pay as part of his offer. Officials at Pep Boys said publicly that Icahn’s offer could be a “superior proposal” to the Bridgestone deal.

On Monday, Pep Boys said in a Securities and Exchange Commission filing that Icahn’s offer may be to “frustrate” Bridgestone from buying Pep Boys, splitting the retailer into parts and offering those parts for sale.

According to Automotive News, Icahn may be offering to purchase the chain to do the exact same thing. Bret Jordan, an analyst at Jefferies LLC, said Icahn could be purchasing Pep Boys to split off parts of its business, such as its tire service centers, to sell to others — including Bridgestone.

“I wouldn’t rule out that he owns it ultimately, but I wouldn’t be surprised if he owned it with the intention of auctioning off the service and tire business,” Jordan told Automotive News.

Icahn owns Auto Plus through his investment company, which is a competitor to Pep Boys. In his disclosure Monday, Icahn said Auto Plus purchasing Pep Boys would be advantageous for the parts supplier.

Icahn previously offered to buy Pep Boys for $13.50 per share before Bridgestone’s offer in October.

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14 Comments on “Carl Icahn Offers to Buy Pep Boys for $863 Million...”

  • avatar

    I heard the deal includes a lifetime supply of fake vents, hoodscoops, and badges…

  • avatar

    Icahn isn’t stupid – he must see something here (strictly from a financial opportunity stand point).

    • 0 avatar

      “Icahn isn’t stupid – he must see something here” Sometimes investors will deal with an eye towards a future write-off, as a loss and subsequent offset for taxes.

      I personally like Pep Boys. Over the decades I have a done a little bit of business with their stores but only because the nearest one is ~100mi south.

      In my area Autozone, NAPA, O’Reilly’s, CarQuest, Motor Supply and mail-order satisfy the need.

      I’ve done tons of business with Rock Auto and JC Whitney over the decades and have never been disappointed.

      • 0 avatar

        I really liked Pep Boys when they had a very large generic Hardware section. They had most sizes of bolts you couldn’t find elsewhere. I was happy to buy everything I could from them at the time to support that. Once they eliminated that, it just became any other part store, just with service center attached.

        • 0 avatar

          @MBella I’m not sure all stores had that. Do you remember the timeframe? I did a lot of systems engineering for them while they were rolling out their parts-only business, to augment their stores that did repairs.

          There was a senior parts guy there at the time, who had done a lot with parts even before that initiative, and I believe he was expecting a raise and a promotion.

          Instead, he got transferred to reporting to someone who had been lateral to him, I believe, and he left before it was done.

          To add salt to his wound, another person had started up the tire center concept, and he got a nice raise and promotion. It was a nice opening of a new market for them, but its bottom line impact was probably less than the impact the parts guy had had due to his streamlining of the parts process, and upgrading it to better work for delivering parts to the trade.

          I’m not sure, but I think this approach of making a wide variety of hardware available to the DIY’er was also his.

          IIRC the timeframe would have been the mid-nineties. The person I am talking about ended up jumping ship to a competitor.

          There were a lot of good senior level operational managers at HQ at that time. Unfortunately, there was also a layer of, shall we say less directly involved in making things happen execs who spent a lot of time jockeying for position and recognition.

          So it would be three steps forward and two back sometimes. Or two forward and three back. The people who got new things going there had to spend a lot of time politicking just to keep their areas relatively free of the politics.

          Some of the brightest managers I met during a long consulting career were people I met there. But there were also a number of least stellar players I ran into also. A lot of musical chairs near the top back at that time.

          Too bad someone hasn’t taken that concept of stocking a wide variety of generic hardware and turned it into an online business. Or maybe they have, and we might get a URL for it from one of the B&B.

  • avatar

    I hate pepboys, but Carl Ichan is a disgusting human being. He destroyed TWA and has no business destroying other companies.

    • 0 avatar

      St. Louis native here.


    • 0 avatar

      When a company cannot remain competitive, and/or when its resources can be used more productively by being invested elsewhere, a company is ripe for takeover.

      No one ever takes over a healthy company and breaks it up in spite of the fact that it is so efficient.

      Somebody has been watching too many re-runs of Michael Douglas in Greed.

      Just as water seeks its lowest level, so too does capital seek its highest and best use.

      And when it isn’t in a plodding company, it sooner or later will get moved to another company or companies that can do better, as judged by the market, in using those resources.

      Gordon Gekko is often held up as an economic example, but a better example would be Adam Smith. It is all about The Wealth of Nations, not a Hollywood movie called Greed written by some tear-jerking liberal pinkish writers.

  • avatar
    Shane Rimmer

    Given that Elio Motors is banking on Pep Boys as their service network, I am sure an impending sale of Pep Boys is going to have an effect on Elio.

  • avatar

    Working for Icahn?

    Shine up the resumes, fellas…

  • avatar

    People at PBY have been looking over their shoulders, and keeping their resumes up to date for years.

    That doesn’t mean that it isn’t a good place to work. I found it to have some good and some bad points, but its best leadership was really very good. And many a person in IT in the Philly area found a decent home there for a good while.

    But the nervousness was always there, as the earnings picture, while perhaps not a bloodbath, was for years a real battle.

  • avatar

    He’l fire Manny and Moe the first day.

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