'More stores,' says Pep Boys' billion-dollar buyer
"We plan to remain a Philadelphia-based company," says boss Michael Odell. Private equity buyer Alan Gores agreed to buy the Philly-based auto parts, service chain
'More stores,' says Pep Boys' billion-dollar buyer
Joseph N. DiStefano
("There's going to be more stores": See DiStefano's column in Tuesday's Inquirer for an interview with Pep Boys' prospective new owner.)
Pep Boys - Manny Moe & Jack, the Philadelphia-based auto parts and service chain, says it has agreed to be acquired by Alec Gores' Los Angeles-based Gores Group for $15 a share, pending shareholder approval, unless a richer offer comes in quick. News release here. The price works out to around $790 million in cash, plus over $200 million in Pep Boys debt that Gores will take over, for a total "enterprise value" of around $1 billion. Pep Boys boss Michael Odell, who's been talking to potential Pep Boys buyers since he took the top job four years ago, has sent letters to Philadelphia Mayor Michael Nutter and Pennsylvania Gov. Tom Corbett "letting them know we are not anticipating moving the headquarters," Odell told me after a 9 a.m. meeting with workers at the 92-year-old store chain's Allegheney Ave. headquarters. "We're proud to be a Philly-based company and we plan to remain a Philly-based company." He'll meet with managers of the company's 700 stores at their annual gathering in Phoenix tonight. Pep Boys employs around 19,000 workers at its offices and 700-plus stores, including 85 purchased last year in a deal with the Big Ten chain, plus three smaller acquisitions, on Odell's watch. Odell and members of his management team have not yet signed contracts to work under Gores, "but they like (Pep Boys') team. They are here to make our vision a reality," Odell said. Gores owns other auto-parts-related businesses; none are currently Pep Boys suppliers and there are no plans to combine the operations.
Buyer Gores owns dozens of companies, including auto shipper United Road Services, of Michigan, and South Carolina-based Sage Automotive Interiors. Its non-auto holdings include Westwood One, the radio and TV programming company that produces Philadelphia-based talker Michael Smerconish's radio show, among many others. More on Gores and what it owns here. Odell says he's looking forward to running Pep Boys as a private company: "One, we don't have to be as open with the world with our strategies. There's things you have to tell your shareholders, because you dont want to surprise them, but you don't want to tell your competitors."
Also, Gores brings "operational expertise" and "a more flexible capital structure" that will make it easier to raise money and finance acquisitions quickly. "They want us to grow," he added. Gores will "take the brand and business to the next level" by "scaling its powerful differentiated service platform," Gores' consumer investments chief Lee Bird said in the statement. Gores will be "supporting (Pep Boys') continued growth and expansion" with its own cash, added Ryan Wald, M&A director at Gores.
The price is about $3 a share above Pep Boys' recent trading level, but less than half its highs from the mid-2000s and mid-1990s, before the company cut its dividend and scaled back on store expansion. Under Odell, Pep Boys has been buying smaller Southern chains, focused more on servcie and less on retail, and started selling parts online, but its growth and profitability trail rivals AutoZone and Advance Auto. The Pep Boys board, including professional investors such as Barington Capital Group boss James A. Mitarotonda, Woods Investment Co.'s John Sweetwood and M. Shan Atkins of Chetrum Capital LLC, as well as Philadelphia accountant Jane Scaccetti (an ex-Mrs. State Sen. Vincent Fumo), approved the sale unanimously; shareholders will also vote at an as-yet unpublished date. Gores hopes to close the deal this Spring. Major shareholders likely to profit from the sale include Boston-based North Run Capital LP, which bought 2 million shares last fall, bringing its total to 4.5 million, or nearly 9% of the company, according to federal SEC filings, and Glenhill Advisors LLC, of New York, which owns almost as big a stake, along with Vanguard Group and other mutual fund companies. Vanguard rival Fidelity Investments sold most of its Pep Boys shares last fall.
Sounds like a real Romney Deal. Massive layoffs, store closings, and an inflated stock price next!— MichaelZoe- It's nice to wake up to good news. I bought PBY at $6.88 and it's currently around $12. I'll take $15 per share.— Sportyrider71
- Pep Boys are CROOKS when it comes to auto repair. The charge you multiple "diagnostic" fees when the only checked one thing. And now they charge a $35.00 "shop fee" whenever they do repairs on your car.
They are just like the Banks ripping you off with they're excessive and unjustified Fees.— Grapost - From a corporate standpoint, they are completely mismanaged from top to bottom. Shareholders should rejoice in this news. Employees should be happy with some trepidation. PE when it comes to retail means that brands may be sold off. Doesn't necessarily mean the company is going to be split and that layoffs are coming down the pike. There is definitely room to grow with this company, as long as new ownership can optimize what is already in existence.— beegal99
- I see what you did there. — StartSnitchin
- The problem with Pep Boys is you never knew their hours. Manny came in at 9, Moe comes in at 10 and Jacks off.— Joe Devola
Comment removed.- MichaelZoe - the alternative is a business that continues to be mis-managed, underperforms, and slowly losses business to the point where it decides the close. Over the past 11 years Pep Boys has averaged a 1% decline in revenue every year and their free cash flow has hovered around 8%. Not exactly stellar performance. In the long run, being overtaken is more likely to preserve jobs. But, nice try.— Bud Fox
Thank God the economy has recovered enough for America getting back to its business of mergers and acquisitions. Whatever the 1% does not own, it will now make sure that it gets everything under its control, including the government and the rest of the 99%. 40% of all business profits comes from finance, you can see why. Opening new factories, installing solar energy, not happening, but Greed is Good Deals... sure why not, we don't have anything else going on now that its been sold off and shut down.- Once the dust settles and the new ownership has time to pour over the books, I suspect they will close under performing stores.— The Baron
- Comment removed.
- I hope they keep the matches— Booper
advanced auto rules when it comes to service and parts and find a local mechanic to do your work at a reasonable rate..went to pep boys and needed a muffler and i was told they didn't do exhaust work. go figure.
- they are trained to ask you if you are interested in services you don't need.— Pluski
- Actually, SmercisAConman, your handle says all anyone needs to know about how (particularly big) business "works". The line about keeping the HQ in Philly seems utterly laughable.
Big business has the best government money can buy. And, that's the way it is!— BEMiller
