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October 26, 2015

Bridgestone buys Pep Boys for $835M

Fate of Philadelphia-based company has been up in the air for years

Bridgestone is acquiring Philadelphia-based auto service shop The Pep Boys: Manny, Moe & Jack for $835 million, the companies announced on Monday.

Based in Tokyo, Bridgestone is the world's largest tire company, but it still has a lot to gain from the deal. By adding the 800-plus Pep Boys locations nationwide to its own inventory of 2,200 U.S. service centers, the company will enjoy an expansion of around 35 percent.

"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 data.

The company's $15-per-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.

"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," Pep Boys CEO Scott Sider said in a statement.

Bridgestone Retail Operations, a subsidiary of the company headquartered in Bloomingdale, Illinois, will pay Pep Boys $15 a share, an increase of 23 percent over its Friday closing stock price.

Pep Boys' stock will stop trading on the New York Stock Exchange after the deal closes near the beginning of 2016. Stockholders can sell their remaining Pep Boys shares for the price above.

The fate of Pep Boys has been up in the air for several years.

It spent two years discussing a possible takeover with the Gores Group and other interested parties before that deal fell apart in 2012, the Wall Street Journal reported. Potential buyers approached the company again this spring, after a fiscal year that showed losses of $27.3 million. In its most recent quarter of 2015, however, the company reported profits of $4.8 million.

Pep Boys, headquartered in East Falls, was founded in 1921 by four friends who pooled together $800 to open an auto parts store in Philadelphia.

Reuters contributed to this story.