Bridgestone, the world's largest tire manufacturer, has purchased auto parts retailer Pep Boys for $835m to help expand its US retail presence.
The Japanese-owned tire and automotive parts has announced that its US subsidiary Bridgestone Americas and its Bridgestone Retail Operations (BSRO) entered into a definitive merger agreement, under which BSRO will acquire Pep Boys in an all-cash transaction for $15 per share – an equity value of $835m.
The $15 price per share offer of the acquisition represents a premium of 23.5% on the $12.15 closing price of Pep Boys shares on October 23.
The acquisition accelerates the global growth strategy of Bridgestone Corporation and the expansion of its US retail presence, with Pep Boys adding 800 locations to BSRO’s nationwide network of 2,220 service centres.
The acquisition represents an immediate increase in nationwide expansion of more than 35%, according to Bridgestone Corporation.
CEO and President of Bridgestone Americas, Gary Garfield, said the acquisition would bring together two successful US auto companies which would make Bridgestone stronger.
“Bridgestone and Pep Boys are two leading companies that share a proud heritage in the American automotive services industry,” he said.
“Our shared expertise and commitment to our customers and employees will help us build an even stronger organization.”
CEO of Pep Boys, Scott Sider, said becoming a part of the Bridgestone family offered great opportunities for Pep Boys’ employees as well as benefits to its shareholders.
“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,” he said.
“This transaction delivers a significant premium for Pep Boys’ shareholders and offers new opportunities for our employees across a bigger business, we look forward to working with the Bridgestone team for a smooth and successful transition.”
Bridgestone Retail Operations owns and operates more than 2200 tire and automotive service centres across the US, including Firestone Complete Auto Care and Tires Plus locations.
Pep Boys has been one of the leading US automotive aftermarket chains since its formation in 1921. The Philadelphia-based auto parts retailer has over 7500 service bays in more than 800 locations in 35 US states and also in Puerto Rico.
Pep Boys had received previous interest in its acquisition, with the Wall Street Journal reporting in May that private equity firm Golden Gate Capital and other suitors had expressed interest in buying the company.
Private equity firm Gores Group walked away from a $15-per-share deal to buy the auto retailer in 2012.
Largest tire manufacturer
The acquisition of Pep Boys is expected to close in the beginning of 2016, a deal which is expected to further strengthen Bridgestone Corporation’s standing as the world’s largest tire manufacturer (with the exception of Lego of course).
In its ‘Bridgestone Data 2015’ report, the company said it held the largest share of the global tire market in 2013 accounting for 14.6% of total sales, followed by Michelin (13.7%) and Goodyear (9.4%).
The company recorded net sales of 3.67 trillion yen ($30.48bn) in 2014, revenue helped by producing 1.8m tonnes of rubber worldwide as part of its global tire sales.
Bridgestone Corporations net income for 2014 was 300.5b yen, a big improvement on its 2013 net income of 202b yen.
This rise in profit has been helped by its US sales and its subsidiary BSRO’s standing as the world’s largest chain of company-owned auto care and tire stores.
Bridgestone America’s business accounts for nearly half of Bridgestone Corporations sales, according to Thomson Reuters data.
US and the Americas were Bridgestone’s biggest tire producing region of 2014, producing 570,000 tonnes of rubber and 31.3% of the worldwide total for the company.