Bridgestone Americas Inc. is acquiring The Pep Boys – Manny, Moe & Jack. The tire maker's retail division, Bridgestone Retail Operations LLC (BSRO), has entered into a merger agreement, and BSRO will acquire Pep Boys in an all-cash transaction for $15 per share, or approximately $835 million in aggregate equity value.
Pep Boys will add approximately 800 locations to BSRO's nationwide network, and Bridgestone says the acquisition represents an immediate nationwide expansion of more than 35% for BSRO.
“Bridgestone and Pep Boys are two leading companies that share a proud heritage in the American automotive services industry,” says Gary Garfield, CEO and president of Bridgestone Americas. “Our shared expertise and commitment to our customers and employees will help us build an even stronger organization.”
BSRO's network also includes 2,200 tire and automotive service centers, which operate under the Firestone Complete Auto Care, Tires Plus, Hibdon Tires Plus and Wheel Works brand banners.
“We are excited to join the Bridgestone family of companies to become part of the world’s largest company-owned tire and automotive service retail network,” says Scott Sider, CEO of Pep Boys. “This transaction delivers a significant premium for Pep Boys’ shareholders and offers new opportunities for our employees across a bigger business. We look forward to working with the Bridgestone team for a smooth and successful transition.”
The transaction is expected to close in the beginning of 2016.
Here are the financial details:
Under the terms of the agreement, which has been unanimously approved by the boards of both Bridgestone and Pep Boys, a wholly-owned subsidiary of BSRO, will commence a tender offer for all outstanding shares of Pep Boys at $15 per share in cash. The completion of the tender offer will be conditioned on Pep Boys’ shareholders tendering at least a majority of Pep Boys’ outstanding shares, determined on a fully diluted basis, and other customary closing conditions, including expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.
Following completion of the tender offer, both companies will complete a merger in which Pep Boys shares that were not tendered in the tender offer will be cancelled and converted into the right to receive $15 per share in cash. Following completion of the transaction, Pep Boys will be wholly owned by and operate under BSRO. Pep Boys’ stock will no longer trade on the New York Stock Exchange.
J.P. Morgan Securities LLC is acting as the exclusive financial advisor to Bridgestone. Jones Day is acting as legal advisor to Bridgestone. Rothschild is acting as the exclusive financial advisor to Pep Boys. Morgan, Lewis & Bockius LLP is acting as legal advisor to Pep Boys.
The $15 per share price represents a premium of 23% higher than Pep Boys’ closing price of $12.15 on Friday, Oct. 23, 2015, and a premium of 62% over Pep Boys’ unaffected (prior to market speculation of a potential transaction) price of $9.25 on May 19, 2015. The transaction is structured as a tender offer.
The history of Pep Boys, headquartered in Philadelphia, goes back to 1921. Today the company operates more than 7,500 service bays in more than 800 locations in 35 states and Puerto Rico. Pep Boys offers tires, maintenance and repair and parts and accessories.
For more information on Pep Boys, visit www.PepBoys.com. For more information about Bridgestone Retail Operations, visit www.bsro.com.
Read what industry analyst and Modern Tire Dealer columnist Nick Mitchell thinks of the acquisition here: What the Bridgestone/Pep Boys Deal Means
