By on December 7, 2015

PepBoysLogo_PressRelease

Billionaire investor Carl Icahn disclosed a 12-percent ownership stake in Pep Boys and said that Auto Plus, a competitor which he owns, should consider buying the retail parts giant, Bloomberg reported.

In October, Bridgestone offered to purchase Pep Boys’ 800 company-owned stores for $835 million to add to its portfolio of 2,200 stores including Tires Plus, Firestone Complete Auto Care, Hibdon Tires Plus and Wheel Works. The acquisition would create the largest chain of automotive service centers, yet many analysts say Bridgestone may be preparing Pep Boys for a potential sale already.

That tender offer from Bridgestone will expire Jan. 4, according to the report.

Icahn’s move isn’t the first attempt at buying the Pep Boys chain. According to the Philadelphia Inquirer, Icahn initially offered to buy the chain at $13.50 per share, which the company refused in favor of Bridgestone’s $15 per share offer in October.

According to a Securities and Exchange Commission filing, Icahn’s move may be an attempt to “frustrate” Bridgestone from splitting off and selling parts of Pep Boys.

Shares of Pep Boys jumped to more than $17 per share Friday before settling around $16 Monday morning.

Retail auto repair stores may be a booming business soon. In July, IHS Automotive reported that the average age for a car in the U.S. was 11.5 years. In its report, IHS said the repair businesses should consider older vehicles as a growing market opportunity.

“I believe we need to begin thinking about that ‘sweet spot’ differently. Now that the average age is 11.5 years, the key repair opportunities must include vehicles older than 11 years, which hasn’t been considered by many in the marketplace up to now,” Mark Seng, global aftermarket practice leader at IHS Automotive, said in a July statement.

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21 Comments on “Parts Giant Pep Boys Has New Suitor in Carl Icahn...”


  • avatar
    CoreyDL

    I always thought Pep Boys was a smaller chain, really.

    Cincinnati area:
    Pep Boys – 5
    Advance Auto – 10
    Autozone – 19
    O’Reilly – 12
    KOI – 17
    NAPA – 13
    CarQuest – 2

    So, they are at least here.

    • 0 avatar
      sproc

      Do any of those besides Pep Boys have actual service departments, though? I always thought of Pep Boys to be a different type of business than just a parts store. (That, plus the world’s greatest collection of awful DIY cosmetic parts outside of Japan.)

      • 0 avatar
        CoreyDL

        Sometimes they do, yes. Usually Advance does.

      • 0 avatar
        raph

        Yes, outside of one Advance Auto I can remember with a service shop. Pep Boys and Car Quest are the only two parts businesses with full service shops as well.

        • 0 avatar

          Funny. CarQuest here is strictly parts. No service bays.

          • 0 avatar
            CoreyDL

            Added CarQuest to my list, because I had never heard of them until now. None of the ones here have service. They’re both in strip malls!

          • 0 avatar
            WhiskeyRiver

            I think that in the case of the well known parts stores with service bays, most of them are “dealer” stores, the majority of which are in smaller markets where a company-owned store wouldn’t be profitable. An established automotive shop augments their business with parts. A win-win for everyone involved as the shop doesn’t have to wait for parts deliveries.

  • avatar
    sirwired

    “Now that the average age is 11.5 years, the key repair opportunities must include vehicles older than 11 years, which hasn’t been considered by many in the marketplace up to now,”

    Make that, “Hasn’t been noticed by a bunch of Wall Street suits whose interaction with “older automobiles” is limited to shaking their head in dismay when the car service has the temerity to pick them up in a four-year-old TownCar.

    It’s kind of funny that this decade-plus car market is invisible to these guys. Cars of that age are the primary market of most retail parts stores, as a five-minute visit to the parking lot of an AutoZone on a nice Saturday can attest. If they didn’t notice that servicing older cars was a big business, they haven’t been paying attention.

  • avatar

    As a kid, I was just mesmerized by the fact that you could go to Pep Boys, buy a roll of trim stripes and Totally change the look of your car (or my mom’s 1987 Accord). We don’t have these in Lubbock though, sadly ;-)

    • 0 avatar
      Lorenzo

      They have 56 parts stores and/or repair shops in Texas, but most are clustered in the east around Houston, Dallas, and Austin. The nearest Pep Boys to Lubbock is in Midland, a long way to go for pin striping, but if you include mud flaps, fuzzy dice, racing stripes, decals, and a bare foot shaped chrome gas pedal in your shopping list, it might be worth a trip.

  • avatar
    Steven Lang

    I wrote about this a year ago. Consider me the least bit surprised that Pep Boys, who partnered with Bob Nardelli less than a year ago, agreed to be acquired. The company has been for sale more than once but Nardelli’s firm tends to be very heavily focused on takeover targets that are worth more in parts instead of the whole.

    http://oppositelock.kinja.com/how-amazon-will-slowly-murder-the-auto-parts-stores-1683776505

    • 0 avatar
      sirwired

      My experience with auto parts from Amazon has been middling. Really, I haven’t found their pricing to be any better than RockAuto, and certainly their website is harder to use, given how it’s not designed for auto parts.

      I’ve gotten a few things from them, but if you don’t know exactly what you are looking for, I’ve found it difficult to find what I need.

      Amazon, as a general-purpose retailer, has some difficulty competing with specialized retail. (You see the same thing with computer parts; NewEgg’s website makes it SO much easier to narrow down the parts that fulfill your needs, that they have continued to do well even though Amazon sells many of the same parts.)

      For me, in-store pickup to a local auto-parts store has been great. Parts are often heavy, and shipping expensive. And if I have a defective or wrong part, I can get the right one a lot faster.

      • 0 avatar
        Steven Lang

        I have Amazon Prime and I can pretty much get it delivered to the repair shop. Sometimes I can get it done within a couple of hours due to the Amazon Now app.

        However, Advance Auto Parts will match Amazon’s prices along with Rockauto. The only pain is I have to arrange for someone to pick it up at a nearby store and I hate having to do that.

        Well, in other news, I managed to sell God’s minivan this afternoon. Lord knows I alreay miss it.

        http://atlanta.craigslist.org/nat/cto/5344282477.html

        • 0 avatar
          sirwired

          Oh, I totally realize that as a DIY, my needs are very different from that of a professional shop or dealership. I have a lot more time trying to figure out which part I need, and of course I can develop in-depth knowledge on the part-number quirks for my particular cars since I only have to worry about two of them.

          It’s impressive that your local Prime Now warehouse even stocks respectable levels of auto parts…

        • 0 avatar

          Funny copy, but how are you able to list that creampuff on the for sale by owner section? ;-)

      • 0 avatar
        VolandoBajo

        My brother in law has been jerking around with aftermarket headlights and one front side light for a couple of weeks now, fresh off of EBay.

        Thanksgiving’s biggest time consumer was about four hours for an oil change and trying to get the headlights to snap fit into the sidelights, which they never did. Wants to try another pair from the same place…”only” $65 for the three assemblies.

        Since each headlamp costs $256 at the dealers, and the one side lamp is about $80, that sounds like a good deal, until we found out our reliable, long-known and well-trusted local mechanic had just done the same job (minus a side light) for another 98 Camry the day before we got there…$80 per H/L plus $20 total labor.

        My brother in law wants to keep trying with his EBay distributor. Says he’s had good luck in the past. Never mind he would drive 250 miles r/t to put the second set in, and what happens if they fail is still being debated.

        Failed once? Like the cop said when his horse died “That’s funny, it never did that before.”

        You can pick a car, you can pick your nose, but you can’t pick your relatives.

        He’s a nice enough guy, but as an electrician, he thinks he knows more about electricity than anyone. Gems include don’t charge a dead battery, it could ruin it. Don’t trust the automatic cutoff on chargers, they could fail and ruin your battery. Don’t worry about loosening the battery caps when you charge a battery (in case the vent holes might be clogged), contamination could get in the battery. (Never mind that the caps still cover the fill holes.) If you do charge a battery, only charge it for three hours at a time, then take it to Advance or Sears to have it tested. Repeat as often as necessary til charged. (Never mind another chain told me six months ago my Grand Marquis battery was going to die in a week or two.) Don’t take your car to your independent shop, they all try to get you to do work you don’t need. (Our man Chad has always laid out our options clearly, never lied or tricked us, and often does small fixes as a favor, rather than write up a small ticket. And his prices are very competitive though not as cheap as the really cheapo shops.)

        I worked for PBY as a computer consultant on a long term contract back in the nineties, and got a deep discount on parts and labor, so I used to take my vehicles there. Sometimes we would get a good mechanic and/or shop foreman. Other times I had things like needing five white box fuel pumps for a Trooper, before finally a mechanic from another place swapped out the housing as well, and it worked. PBY only charged me once, but lots of hassles and towing.

        And a brake job I picked up on a Friday night seized up before I could drive home five miles…forgot to back off the drum brakes. Had to wait two or three hours for the brakes to cool down so I could drive it back and leave it for Sat. morning.

        In short, hit or miss.

        They had some parts only stores they started in the late nineties…called them APD for Auto Parts Distributor at first, later turned them into PBY branded parts only stores. I think they have a few service only ones also.

        They had some good people and good shops, but QC was impossible to maintain uniformly.

        And they had a program where if they didn’t stock the part, they would buy it from a competitor and then mark it up. If you didn’t shop around and didn’t know to find out if it was an outside-procured part, you could end up paying close to twice what it might have cost at NAPA, for example. As people caught on, usually after they had been stung more than once if they were regulars, they would be PO’d, and some customer good will was burned up that way.

        On the other hand, their former CEO Mitch, who used to be the guy who kept and balanced the checkbook for one of the three brothers, was a good and conscientious CEO. I always liked him and his attitude. But the empire was too sprawling to be able to keep it all running at top efficiency and quality.

        I suspect that it might lend itself to better distributed management leading to profitability, as an alternate route to parceling it out. Though they also might very well sell off individual stores and small groups of stores for smaller parts distributors, both existing and new.

        We will see…but Icahn has a rep of chopping up and selling off companies, so if I were a senior exec there, I’d be worried right now.

  • avatar
    S2k Chris

    I simply fail to understand the whole auto parts store model. In my old town, which was split between higher blue collar and lower white collar/professional about 50/50, and had about 50k people, we had at least 4 big name auto parts stores (Autozone, O’Reilly, etc) on the same street within about 2.5 miles of each other. And that’s mirrored in almost every other town in Chicagoland; every one has an Autozone, Advanced, O’Reilly, NAPA, etc. How can they all be sustainable?

    • 0 avatar
      01 Deville

      “. How can they all be sustainable?”
      Try sourcing cheap chinese parts, slapping your brand name on it and selling it for thrice the going price on Ebay. The e-commerce averse still finds them a deal when compared to parts cost of repair chains, that have an even higher upcharge.

    • 0 avatar
      01 Deville

      My two experiences with Pepboys when I had my dear now departed deville.

      1. Bad Alternator, qouted $700 4.5hr labor plus $250 part which is reasonable for a FWD Northstar, dealer qoute being $900. Got the part for S120 at Advance autoparts and had a shade tree guy replace it for $200. They charged may battery for free multiple times though and did check for free a junk alternator that I got from Ebay for $30.

      2. ECBM control module went bad and was quoted $650 from both Pepboys and Caddy dealer. Took about an hour to take it out myself and got it rebuilt on Ebay for less than $60 shipping included.

  • avatar
    CincyDavid

    AAP and CarQuest now have the same parent company, so I suspect you’ll see fewer and fewer CQ-branded stores. I absolutely detest Pep Boys and refuse to shop there.

    Retail brick and mortar part pricing is getting crazy vs. online shopping. As long as you don’t need the part TODAY having it shipped from IPD or other reputable online vendors is a great alternative.

    There is a lot of value in having a parts store with a good counterman…but they are few and far between. I like NAPA stores because their staff seems to know more than the nitwits at AAP/Autozone/PepBoys. I always thought of NAPA and CarQuest as being more oriented toward professionals, AAP/Autozone/Pep Boys geared toward amateurs, and O’Reilly’s somewhere in the middle. My recent experiences with O’Reilly’s has been less-than-stellar…high prices, and stupid countermen.


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