What the Bridgestone/Pep Boys Deal Means
The news that The Pep Boys — Manny, Moe & Jack is getting a new owner shouldn't come as a complete shock. The company in June announced it would seek sale and merger options.
Industry analyst and Modern Tire Dealer columnist Nick Mitchell says the deal with Bridgestone Americas Inc. looks like a good one.
Mitchell says, "We have long thought that Pep Boys' shares were worth significantly more than the price in the market (BUY rated with $15 price target), and we thought it was prudent for the board to pursue a transaction or partnership that would unlock the hidden value.
"Needless to say, we were excited to see a deal announced, and we think that the terms of the agreement were favorable. It is unclear as to whether Bridgestone will seek to divest the DIY and commercial delivery business, or if it has plans to enter the parts distribution segment of the automotive aftermarket.
"Either way, the announcement is a clear sign that Bridgestone is committed to its retail strategy in U.S.
"At this point, we would say the odds are low that another bidder emerges on the scene."
Mitchell is senior vice president of research for Northcoast Research Holdings LLC.
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