NASHVILLE, Tenn.—Bridgestone Americas Inc. has agreed to buy Philadelphia-based tire retailer/auto service provider Pep Boys—Manny, Moe & Jack for about $835 million.
Bridgestone is offering $15 a share for Pep Boys, which the tire maker said is a premium of 23 percent over Pep Boys' closing price of $12.15 on Oct. 23 and 62 percent over Pep Boys' unaffected (prior to market speculation of a potential transaction) price of $9.25 on May 19.
“Bridgestone and Pep Boys are two leading companies that share a proud heritage in the American automotive services industry,” said 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.”
Pep Boys operates more than 800 retail locations with 7,500-plus service bays in 35 states and Puerto Rico, including 234 tire-centric Service & Tire stores. Fiscal 2014 sales were $2.08 billion.
The acquisition will boost Bridgestone Americas' retail presence in the U.S. to more the 3,000 locations, which operate under the Firestone Complete Auto Care, Tires Plus, Hibdon Tires Plus and Wheel Works brand banners.
Bridgestone also claims to be represented by more than 5,000 independent dealers and distributors in the U.S.
“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,” Pep Boys CEO Scott Sider said.
“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. Under the terms of the agreement, which has been approved unanimously by the boards of both Bridgestone and Pep Boys, a wholly owned subsidiary of Bridgestone Retail Operations 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 Bridgestone Retail Operations (BSRO). Pep Boys' stock will no longer trade on the New York Stock Exchange.
J.P. Morgan Securities L.L.C. is acting as the exclusive financial adviser to Bridgestone. Jones Day is acting as legal adviser to Bridgestone. Rothschild is acting as the exclusive financial adviser to Pep Boys and Morgan, Lewis & Bockius L.L.P. is acting as legal adviser to the chain.