Raising the stakes even further, Icahn Enterprises raised its offer late yesterday to $18.50 a share for Pep Boys, an 800-store aftermarket auto parts store. The move is the latest in a series of back-and-forth actions that began several weeks ago when the bidding over the chain began. It has continued to this point where the next move is still unknown.
Yesterday’s all-cash offer raised the stakes in the bidding war for the parts chain to more than $1 billion. In announcing the new offer, Icahn Enterprises indicated it would be willing to go higher, provided that Pep Boys does not raise the termination fee in its deal with Bridgestone Corp. Pep Boys had accepted a $17-a-share offer from Bridgestone last week, following an earlier bid from Icahn, said Automotive News. Yesterday’s action ratcheted up the pressure yet again.
Taking quick action, Pep Boys board of directors said that Icahn’s new proposal was superior to Bridgestone’s offer and gave the auto industry giant until 5 p.m. Thursday to respond. Meantime, the board moved to terminate the agreement with Bridgestone.
As Automotive News pointed out, the battle for Pep Boys illustrates the underlying strength of the automotive aftermarket and outlets like Pep Boys. Thanks to a burgeoning older car population – the average age of the American car has hit a high of 11 years – Bridgestone and Icahn are seeking to expand their footprints in the tire and auto-repair sector. Adding the 800-store chain would enable that desire as it would expand their reach in 30 states. Bridgestone operates more than 2,200 auto repair centers across the country, while Icahn runs the Auto Plus chain that he acquired earlier this year. His plans call for combining Auto Plus and Pep Boys.
Also, Icahn has an 82 percent stake in Federal-Mogul Holdings (FMH). FMH is the owner of major aftermarket auto parts brands. The brands include:
- Champion Spark Plugs
- MOOG steering parts
- ANCO wiper blades
- Wagner brake parts
There is no clear outline yet of how FMH would benefit from Icahn’s latest foray into auto parts retailing.
Pep Boys stockholders are clearly benefiting from the bidding war that is going on. Under the influence of Icahn’s offer late yesterday, Pep Boys’ stock shot up 7.1 percent to a high of $18.65. As a result of the competition between Icahn and Bridgestone, Pep Boys share has jumped 77 percent. The parts chain had no comment on Icahn’s latest bid.