Why Bridgestone walked away from Pep Boys deal, and may come back

'Bridgestone Corp. CEO Masaaki Tsuya did something rare in Japanese business circles: He put corporate pride aside, and walked away from an escalating bidding war with corporate raider Carl Icahn for the U.S. auto parts chain Pep Boys," Bloomberg's Jie Ma and Yuki Hagiwara reported.

Bridgestone's refusal to overpay for Pep Boys last winter followed its own "unpleasant" $2.7 billion acquisition of Firestone - way back in 1988, when Tsuya was a young Bridgestone manager, at a time when Japan's dominance of the global car and electronics industries gave such giants as Bridgestone billions to buy American firms.

Bridgestone is still looking for U.S. repair shops to buy: "It may also consider acquiring some of Pep Boys' business if they're up for sale again," Bloomberg says, citing Tsuya.

Of course debt-fueled "financial" investors such as Icahn often pay more vs. "strategic" corporate buyers such as Bridgestone. Icahn, a sometime ally and competitor of Republican presidential candidate Donald Trump, also invests in energy, mining, insurance, manufacturing, and tech stocks and in Trump Taj Mahal and Tropicana casinos in Atlantic City, among other properties.

Outbidding Bridgestone, Icahn took Pep Boys private and has replaced top Philadelphia-based executives with leaders of his Auto Plus chain, based in Georgia.

"The acquisition would have been a good fit for the Japanese tire maker," adding more than 800 Pep Boys-owned locations to Bridgestone's 2,200 Firestone and other U.S. stores.

But when Icahn bid the price more than $160 million above Bridgestone's first offer and $50 million-plus above its last offer, it was too much, Tsuya confirmed: "It's like selecting a husband for your daughter. You have to be skeptical and keep asking whether she has really made the right choice."

"Bridgestone paid way too much" for Firestone, lowering its profits, Bloomberg notes. Firestone factories turned out to be outdated; the Ford SUV recalls of the early 2000s and hundreds of highway deaths were blamed on bad Firestone tires.

It's no wonder, when Philadelphia-based Pep Boys went on the market, that "Bridgestone showed restraint." It raised its initial $15 bid to $17, but let Icahn buy Pep Boys and merge it into his recently acquired Auto Plus at $18.50 a share, topping $1 billion.

"It's a decision we had made in advance, so there was no hesitation from anybody," Tsuya told Bloomberg.

Tsuya, who joined Bridgestone in 1976, was a junior member on the team that worked on the Firestone acquisition.

While the Firestone takeover helped Bridgestone expand, Tsuya said, if he could do it all over again, he would have nickel-and-dimed the seller, instead of driving away competitors with Bridgestone's fat above-market bid. "It was like rushing into a marriage with too much passion," Tsuya concluded.

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