Bridgestone to Buy Auto Parts Retailer Pep Boys

Wall Street Pep Boys
Richard Drew/APManny, Moe and Jack, mascots of Pep Boys, pose for photos on the floor of the New York Stock Exchange to celebrate the company's 90th anniversary in 2011.

By Arunima Banerjee and Anya George Tharakan

Japanese tire-maker Bridgestone said it would buy auto parts retailer Pep Boys-Manny, Moe & Jack (PBY) for $835 million to expand its retail presence in the United States.

The deal will boost Bridgestone's retail network by more than a third in the United States, the company said.

Bridgestone operates a chain of auto care and tire stores in the United States through its Bridgestone Retail Operations unit.

%VIRTUAL-WSSCourseInline-908%"Bridgestone is looking to expand its market share in services and tires ... it's a little harder to understand what they might do with [Pep Boys'] retail operations but they'll come up with a plan for it," Jefferies analyst Bret Jordan said, adding that it was unlikely the company would get rival bids from strategic buyers.

Bridgestone's U.S. business accounts for nearly half of its total sales, according to Thomson Reuters (TRI) data.

The company's $15-a-share cash offer represents a premium of 23.5 percent to Pep Boys' Friday closing. Pep-Boys' shares jumped nearly 23.3 percent to $14.98 in morning trading.

The company, founded in 1921 by four friends who pooled together $800 to open an auto parts store in Philadelphia, will add about 800 locations to BSRO's existing 2,200 centers.

Pep Boys has been on the block since June, when it said it was considering selling itself as part of a strategic review.

Unlike rivals AutoZone (AZO) and Advance Auto Parts (AAP), Pep Boys hasn't benefited from a resurgent U.S. auto industry due to high costs eating into its earnings and falling sales at its do-it-yourself business.

The Wall Street Journal reported in May that private equity firm Golden Gate Capital and other suitors had expressed interest in buying the company.

Private equity firm Gores Group walked away from a $15-a-share deal to buy Pep Boys in 2012.

The deal is expected to close in the beginning of 2016.

Originally published