Shares of Pep Boys — Manny, Moe & Jack fell 20 percent, to less than $9 a share, in trading Wednesday after Los Angeles-based buyout investor Gores Group said it was walking away from its January offer of $15 a share.
Gores has had such a severe case of buyers’ remorse that it’s paying a $50 million breakup fee to Pep Boys for the privilege of not owning the North Philly-based auto-parts and service chain.
The new stock price isn’t much more than the "estimated value of underlying real estate" at Pep Boys’ 700 stores, David A. Schick, analyst at Stifel Nicolaus & Co., told investors in a note. It’s as if the business would be worth as much dead as alive.
Schick doesn’t quite believe that — he said the shares should trade up to $11, a modest premium, though less than AutoZone, Advance Auto Parts, and other rival chains command at current prices.
Pep Boys boss Mike Odell told investors that his $2 billion (yearly sales) company has plenty of cash and plans to keep expanding, thanks partly to Gores’ rich kiss goodbye.
Still, "Gores Group’s willingness to pay a breakup fee without litigation is likely a bad sign of the current state of affairs at Pep Boys," Schick said.
The stock is now back to its woeful lows of last summer, after falling from Gores’ offer price to less than $12 on May 1, when the company first noted that Gores was getting cold feet following an unexpected fourth-quarter loss that Odell blamed on the warm winter cutting sales.
Odell also admitted computer-system glitches. Those troubles raise questions about management’s effectiveness in executing its business plan, according to Schick.
"People haven’t been able to afford new cars, so Pep Boys should be coining money. But they’ve had problems with execution ever since they doubled their store count in the 1990s," said Robert Costello, of Costello Asset Management in Huntingdon Valley.
Odell will try to convince investors that Pep Boys has a brighter future after posting second-quarter sales and profits next week.
Temple University’s 26-story tower, its rooftop conference center-theater, and the surrounding 1,200-bed dorm, dining and retail complex now rising under construction cranes at North Broad Street between Oxford Street and Cecil B. Moore Avenue will be named for King of Prussia-based apartment mogul and national Republican fund raiser Mitchell L. Morgan and his wife, Hilarie.
His fellow trustees see Morgan as a classic Owl, a city kid-made-good who has headed his alma mater’s facilities committee and its relentlessly cheerful alumni begging efforts since he was drafted by the late Temple chairman and Ron Perelman lieutenant Howard Gittis early last decade to help finance the school’s $1.2 billion Temple 20/20 expansion program.
The naming "recognizes the Morgans’ lifetime of support for the university, including a recent $5 million commitment," Temple said in a statement. The price tag, $216 million, is mostly financed by tax-exempt bond sales.
Why Temple? "My parents never went to college. I worked my way through what’s now the Fox Business School, studying accounting, [by] selling shoes at Broad and Lehigh," Morgan told me. "Then the law school at night," while working as an accountant.
When he revisited Temple at Gittis’ invitation, the school he remembered as a commuter-driven "community college" had become a place where thousands of students studied, partied and slept, sometimes to the annoyance of their neighbors.
"This facility will promote that concept of residential living at Temple," he said of Morgan Hall. "We’ll get the kids out of the neighborhoods, where they’ve been coming home at 3 in the morning, and down toward Center City."
The high-rise is designed to serve as Temple’s southern gateway, much as Drexel and Penn have reversed their expansion from West Philadelphia toward the Schuylkill and Philadelphia’s pleasant downtown. "It’s a beautiful building," Morgan said. "I like that when I visit offices in Center City, my lawyers and others, I can see the building rise."