Parts Giant Pep Boys Has New Suitor in Carl Icahn
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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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?
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.