Auto services giant Bridgestone’s subsidiary company, Bridgestone Retail Operations LLC, has announced an agreement allowing them to acquire Pep Boys for about $835 million. The deal is said to be completed by early 2016, pending approval by Pep Boys shareholders.
The auto aftermarket chain will see about $15 per share from Bridgestone once the deal goes through, in what will be an all-cash transaction. Pep Boys closed at $12.15 per share on Oct. 23, 2015, making this a 23% markup. In addition, their unaffected price was $9.25 on May 19, 2015, making it a 62% markup.
Pep Boys had been a staple in the auto services industry, with more than 7,500 service areas at 800 locations in 35 states and Puerto Rico. Their services include offering tires, maintenance, repairs, and parts. They have been in operation since 1921.
The deal will give Bridgestone 100% control over Pep Boys once the deal is completed, meaning their stock will no longer be available for trade in the New York Stock Exchange. A Pep Boys spokesman says that although they are being acquired, some stores will continue to carry the Pep Boys name.
“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.”
Other industry officials also had thoughts on the mammoth deal:
With this acquisition, Bridgestone Corporation accelerates a global growth strategy they have had planned. They are currently the biggest tire and rubber company in the entire world, with several subsidiary companies such as Bridgestone Americas underneath them.
The 800 locations currently owned by Pep Boys will now be in a portfolio of 2,200 other tire and auto services locations operating under Firestone Complete Auto Care, Tires Plus, Hibdon Tires Plus, and Wheel Works brand banners.
The companies hope that the acquisition will allow them to reach out to even more consumers. The Pep Boys locations only add to an already mammoth network of centers.
“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,” said 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 agreement has been approved unanimously by the boards of both companies. The acquisition will represent a 35% nationwide expansion for BSRO. The deal is now only dependent on shareholders and the formal closing paperwork, which includes expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.
The companies will complete an official merger once the offers and closings have been dealt with. Following the closure of the deal, Pep Boys will be completely owned and operated by Bridgestone.
The exclusive acting financial advisor to Bridgestone is currently J.P. Morgan Securities LLC, while their legal advisor is Jones Day. For Pep Boys, Rothschild is the exclusive financial advisor and Morgan, Lewis and Bockius LLP is their legal advisor.