Icahn offers counterbid for Pep Boys

Bridgestone Americas’ cash tender offer to acquire US automotive service and retail chain The Pep Boys – Manny, Moe & Jack for US$15.00 a share has been challenged by Icahn Enterprises L.P. The New York-based master limited partnership and owner of automotive aftermarket distributor Auto Plus has written to the Pep Boys’ board, proposing to pay a cash sum of $15.50 per share to acquire the entire outstanding stake in the company – an offer it believes “clearly superior” to the Bridgestone transaction.

“This proposal is NOT subject to any due diligence, financing or antitrust conditions,” states the letter, which was signed by Icahn chief executive officer Keith Cozza. “And we are prepared to enter immediately into the exact same merger agreement that Pep Boys executed with Bridgestone Retail Operations, LLC. In addition, we will enter into any reasonable further agreements that you may require in order to provide greater certainty of closing.”

Claiming that Icahn’s “financial wherewithal to close expeditiously is indisputable,” the letter indicates that the company is prepared to meet with the Pep Boys board “immediately to negotiate and document this transaction.”

This $15.50 offer isn’t Icahn’s first stab at acquiring Pep Boys. Yesterday the Pep Boys confirmed Icahn’s prior interest in Pep Boys and its retail business in particular. Pep Boys reported that discussions regarding a potential acquisition “took place over six months” but didn’t lead to Icahn making an offer “superior in value” to Bridgestone’s $15.00 a share offer. “Notably, on October 22, 2015, Icahn declined to increase its previously delivered $13.50 per share proposal for the company.”

On 4 December, investor Carl Icahn disclosed in an SEC filing that he’s acquired a 12.1 per cent stake in Pep Boys; Icahn’s reported aim is to merge Pep Boys with the Auto Plus network. Furthermore, Icahn made a ‘Hart-Scott-Rodino’ anti-trust filing that disclosed a “good faith intention,” dependent upon various factors including market conditions, to acquire in excess of a majority of Pep Boys’ outstanding voting securities. However, in its SEC filing Icahn reserves its right to propose a variety of other transactions involving Pep Boys in order to achieve its stated interest in acquiring Pep Boys’ retail business.

“These notices have raised concerns that Icahn may be taking these actions to obtain negotiating leverage in its discussions with third parties regarding Icahn’s potential purchase of Pep Boys’ retail business and, as a result, Pep Boys shareholders’ ability to realise the value presented by the Bridgestone offer may be frustrated,” wrote Pep Boys in a statement published yesterday.