Pep Boys (NYSE:PBY) inked an $804 million deal on Monday to be taken private by the Gore Group in a transaction that values the retail auto-parts and service chain at a 24% premium.
The Gores Group said Pep Boys CEO Michael Odell and other senior executives are expected to stay on in their current roles following the transaction’s closing.
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Based in Philadelphia, Pep Boys-Manny, Moe & Jack sells automotive services, tires, parts and other auto accessories. The company, which was founded in 1921, employed over 12,000 workers as of October 2011 and brought in $1.99 billion in revenue in its fiscal 2011.
“For over 90 years, Pep Boys has been the leading automotive service and retail chain and we look forward to supporting the company’s continued growth and expansion with our substantial equity resources,” Ryan Wald, managing director of mergers & acquisitions at the Gores Group, said in a statement.
The Gores Group agreed to pay $15 a share for Pep Boys, representing a 24% increase from the company’s Friday close of $12.08. Perhaps the private-equity firm thought Pep Boys shares were cheap as they had retreated almost 14% over the prior 12 months.
The buyout includes a 45-day “go-shop” period, leaving the door open that another suitor could trump the Gores Group offer price.
Shares of Pep Boys rallied 25.1% to $15.11 ahead of Monday’s open, surpassing the $15 offer price.
In anticipation of the acquisition, Pep Boys said it has suspended its quarterly dividend.
“Partnering with The Gores Group delivers a significant premium for Pep Boys’ shareholders and ensures a strong foundation for us to continue our expansion,” Odell said. “Our board firmly believes that this transaction is in the best interests of all of our stakeholders and delivers an ongoing commitment to excellence for our customers and employees.”
When debt is included, the total enterprise value of the Pep Boys agreement rises to about $1 billion.
Bank of America Merrill Lynch (NYSE:BAC) advised Pep Boys on the deal, which is expected to the second fiscal quarter of 2012. Credit Suisse (NYSE:CS), Barclays (NYSE:BCS) and Sagent Advisors advised the Gores Group.
After a painfully-slow start to 2012, the M&A world is beginning to show signs of life in recent days. In addition to the Pep Boys deal, Swiss engineering company ABB unveiled a $3.9 billion buyout of American electrical components maker Thomas & Betts (NYSE:TNB) on Monday and last week Swiss drug maker Roche announced a takeover of Illumina (NASDAQ:ILMN).