Pep Boys surges after Icahn raises bid above $1B
Pep Boys shares jumped 8.8 percent Tuesday after Carl Icahn raised his takeover offer for the auto-parts chain to more than $1 billion, escalating a bidding war with Bridgestone Corp.
The stock closed at $18.94 in New York, above the $18.50-a-share in cash offered by Icahn’s investment firm on Monday, putting pressure on Bridgestone to match or top the billionaire’s bid. Icahn Enterprises said it would be willing to boost the proposal even further if Pep Boys doesn’t increase the termination fee in its deal with Bridgestone.
Pep Boys, based in Philadelphia, had accepted a sweetened, $17-a-share offer from the the Japanese tire giant last week, following an earlier bid from Icahn. Bridgestone will decide on its next steps within three business days, spokesman Fusamaro Iijima said on Tuesday. The takeover battle underscores the confidence that Icahn and Bridgestone have in the U.S. auto- parts retailing industry, which has benefited from an aging vehicle fleet on American roads.
Shares of the company, whose full name is Pep Boys Manny, Moe & Jack, had already gained 77 percent this year, largely driven by the bidding war. Bridgestone rose 0.6 percent to 4,157 yen in Tokyo.
Both Bridgestone and Icahn are 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 country. Icahn, meanwhile, plans to combine Pep Boys with the Auto Plus chain, which he acquired earlier this year.
Pep Boys trades at 64 times forward 12-month earnings, versus the 18 times average for U.S. auto retailers, according to data compiled by Bloomberg.
The company said in a statement that Icahn’s proposal was superior and gave Bridgestone until 5 p.m. New York time on Thursday to make another offer or terminate their agreement. Icahn had previously said he was willing to pay at least $18.10 a share and was puzzled by Pep Boys’ board opting for the Bridgestone offer.
“We cannot understand the actions of the directors in that they know we were willing to offer a lot more than $17,” he said last week.