Not So Fast Bridgestone, There’s Another Bid for Pep Boys
Since November billionaire investor Carl Icahn of Icahn Enterprises Holdings L.P. has bought up more than 12% of the available shares of The Pep Boys — Manny, Moe & Jack, and now Icahn Enterprises says it wants to buy all outstanding shares, and it is offering a higher price than Bridgestone Retail Operations LLC.
In a Dec. 7 letter to Pep Boys, Icahn Enterprises’ CEO Keith Cozza offered $15.50 per share — that’s 50-cents higher than the previously announced Bridgestone deal.
“This proposal is NOT subject to any due diligence, financing or antitrust conditions and we are prepared to enter immediately into the exact merger agreement that Pep Boys executed with Bridgestone Retail Operations LLC,” Cozza wrote.
“We believe our proposal is clearly superior to the $15 per share Bridgestone transaction and that our financial wherewithal to close expeditiously is indisputable.”
Icahn Enterprises owns Auto Plus, and Icahn reveals in a filing with the U.S. Securities and Exchange Commission (SEC) he thinks Pep Boys’ retail automotive parts segment “presents an excellent synergistic acquisition opportunity” for Auto Plus.
On Dec. 8 the Pep Boys board of directors acknowledged it's reasonable to expect the Icahn offer would result in a "superior proposal," which is a technical term and finding that allows the board to take certain actions which were laid out in the details with Bridgestone.
In effect, it allows the board to consider the Icahn proposal. "This determination does not allow the company to terminate the Bridgestone agreement, nor enter into a definitive transaction with Icahn."
This is at least Icahn's second attempt to buy Pep Boys this year. In a separate SEC filing Pep Boys acknowledged it had held discussions with Icahn over a six-month period, and on Oct. 22, 2015, Icahn "declined to increase its previously delivered $13.50 per share proposal for the company." Four days later Bridgestone and Pep Boys announced their deal.
The latest Icahn offer arrived the same day Pep Boys issued a press release announcing its third quarter earnings for the quarter ended Oct. 31, 2015. In the earnings report, Pep Boys says sales for the quarter were down, from $517.6 million in 2014 to $508.1 million in 2015. Net earnings were $1.3 million, up from the net loss of $2 million for the same period in 2014. Pep Boys says the earnings improvement in 2015 included a $6 million gain from the sale of two locations, offset by $5.6 million in combined asset impairment, merger and acquisition, legal and severance charges.
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