Aozora Alliance Pep Boys in $791 Million Sale.
Aozora Alliance - Auto parts chain is to be sold to the Gores Group LLC in a $791 million deal.
Online, March 13, 2012 (Newswire.com) - Aozora Alliance believes that the auto parts chain The Pep Boys - Manny, Moe & Jack, has agreed in principle to be taken over by The Gores Group, a private investment firm, for around $791 million. The Pep Boys have more than 700 stores across the United States and Puerto Rico, with over 100 of them in southern California, where the Pep Boys are synonymous with the car culture.
The 91-year-old company is famous for its long history in California and its distinctive name: The full moniker is the Pep Boys - Manny, Moe & Jack. But it has struggled for years in a tough industry with a lot of competition.
Their first store opened in Philadelphia under the name Pep Auto Supplies, according to the company's web site. Its name was changed around 1923 after Maurice "Moe" Strauss noticed during a trip to California that many successful businesses there used first names.
Founded by Alec Gores in 1987, Gores Group has acquired and operated more than 80 companies since its inception. Gores is the brother of Tom Gores, who runs a separate private equity firm, Platinum Equity in Beverly Hills.
The group is offering a 24 per cent premium on the Pep Boy's share price as of the announcement, offering $15 per share. Aozora Alliance has learned that the deal contains the provision that the Pep Boys can solicit for higher bids up until the middle of March.
"We've been keeping an eye on Pep Boys for quite some time and watching what this management team has been doing," said Ryan Wald, managing director of mergers and acquisitions at Gores Group. "And what they have done is accomplish a good turnaround. We believe they've turned the corner and are primed for some real growth."
The deal calls for the existing management structure to remain in place, with a commitment from Gores to expand. The Gores Group have stated that they have no plans to close any of the more than 700 locations or of making any of its approximately 19,000 employees redundant.
Once the acquisition closes, expected by midsummer, Pep Boys will stop trading on the New York Stock Exchange. The 90-year-old company has already suspended its quarterly dividend.
In December 2011 the company reported that its fiscal third-quarter net income rose nearly 23 percent on stronger tire sales and improving service sales. At the time President and CEO Mike Odell said that the improved business was due in part to new marketing, lower gas prices and pent-up demand.
Shares in Pep Boys saw their all time high of $37 back in 1996, but saw their low point of $3 only in 2009 after a run of four straight years of losses. The company returned to profitability in 2010 and it is this recovery by the management team that caught the eye of The Gores Group. However an analyst at Aozora Alliance believes that it will take significant time and investment for the Pep Boys to complete its turnaround.