Updated to include analyst comments and updated stock prices
NEW YORK ( TheStreet) -- Pep Boys (PBY), the nation's leading automotive aftermarket service and retail chain, is being bought by private-equity firm Gores Group for $15 a share, a 24% percent to Pep Boys' closing price of $12.08 on Friday.
The deal reached with Los Angeles-based Gores Group values Pep Boys at an enterprise value of $1 billion. The deal will need to be approved by shareholders and will undergo a 45-day "go-shop" period, according to a press release. For the Gores Group, a move to buy Pep Boys and its Manny, Moe and Jack brand, which has been around for more than 90 years, may signal a bet on the auto industry and Pep Boys' tires, parts and auto repairs specialty.
"Our Board firmly believes that this transaction is in the best interests of all of our stakeholders and delivers an ongoing commitment to excellence for our customers and employees," said Pep Boys' CEO Mike Odell of the deal, which is expected to close in the second quarter of 2012.The company was reported to have hired investment bankers to explore a sale in early 2011, following years of speculation that it would look for a buyer. But even with a month and a half "go-shop" period, analysts expect Monday's takeover offer to be final. "We do not expect another leverage buyout firm to counter-offer Gores Group and thus believe that the $15/share bid will be final," wrote Cabrera Capital Markets analyst Cid Wilson. Pep Boys' shares rose to $14.94, just under a 24% rise and slightly below the offer price in late afternoon trading on news of the deal. The Philadelphia-based company's shares fell nearly 20% in 2011 even as its annual sales and profit rose to $2 billion and $36.6 million in 2011, respectively. Prior to the deal, Pep Boys warranted a $13.60 a share average price target, according to consensus estimates compiled by Bloomberg, reflecting expectations for the coming year of $2.2 billion in sales and $50 million in profit.
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