Bridgestone relents, Icahn prevails in $1 billion bidding war for Pep Boys

December 29, 2015 – 10:08 pm ET

NEW YORK (Bloomberg) — Bridgestone Corp. backed down from a bidding war with billionaire investor Carl Icahn, declining to match his takeover offer of more than $ 1 billion for the Pep Boys auto-parts retail chain.

Bridgestone’s shares rose the most in two weeks in Tokyo after the tire maker said late Tuesday it won’t counter the $ 18.50-a-share bid made by Icahn’s investment firm on Monday. At the time, Icahn Enterprises said it would be willing to boost the proposal even further if Pep Boys didn’t increase the termination fee in its deal with Bridgestone.

The takeover battle underscores the confidence that Icahn and Bridgestone have in the U.S. auto-parts retailing industry, which stands to benefit from an aging vehicle fleet on American roads. Both companies were seeking to expand their presence in the tire and automotive-repair sector by adding Pep Boys’ 800 locations across more than 30 states.

Icahn also holds a dominant 82 percent stake in Federal-Mogul Holdings Corp., which owns about 20 major aftermarket auto parts brands such as Champion Spark Plugs, MOOG steering parts, ANCO wiper blades and Wagner brake parts. It’s not yet clear how Icahn plans to position the supplier to benefit from his further expansion into parts retailing.

Bridgestone operates more than 2,200 tire and automotive centers in the U.S. Icahn, meanwhile, plans to combine Pep Boys with the Auto Plus chain, which he acquired earlier this year. Analysts have speculated Icahn may only be interested in Pep Boys’ retail operation and would plan to sell the tire and services division to other interested parties such as Bridgestone.

Fusamaro Iijima, a spokesman for Bridgestone, declined to comment on the company’s plans, including whether it would seek to buy part of the Pep Boys operations from Icahn.

Pep Boys has underperformed its peers and may require an overhaul, said James Albertine, an analyst at Stifel Financial Corp. For the past decade, the company has averaged same-store sales declines of 1.6 percent, he wrote in a report on Tuesday.

Shares of the Philadelphia-based auto retailer, whose full name is Pep Boys — Manny, Moe & Jack, fell as much as 3.2 percent from its Tuesday close to $ 18.32 in after-hours trading. The stock had gained 93 percent this year, largely driven by the bidding war.

Automotive News contributed to this report.

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