The battle to acquire Pep Boys has deepened as the company said in a press release this morning that activist investor Carl Icahn’s all-cash offer of $15.50 per share “would reasonably be expected to result in a ‘Superior Proposal’ as defined in the Company’s agreement and plan of merger with Bridgestone.” Icahn’s offer became public on Monday through a regulatory filing with the Securities and Exchange Commission.

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Chart via S&P Capital IQ

Pep Boys may not be liable for breakup fee if it takes Icahn’s offer

Pep Boys had already entered a definitive agreement to be acquired by Bridgestone, and that deal included a breakup fee of $35 million and also a provision for what would happen if a “Superior Proposal” was made by another party. Icahn had been meeting with the automotive chain for six months but previously hadn’t offered anything over $13.50 per share, which was no match for Bridgestone’s all-cash offer of $15 per share, which was finalized as a definitive agreement on Nov. 16 following the announcement on Oct. 26 that Bridgestone had made a tender offer for Pep Boys.

Icahn’s new offer of $15.50 per share is not subject to due diligence or other major conditions and is essentially the same offer as Bridgestone’s other than the higher valuation. The activist investor sees Pep Boys as a good acquisition target for its competitor Auto Plus, which he owns.

Pep Boys moves to the next step

Pep Boys’ board of directors has determined that Icahn’s offer falls under what the definitive agreement with Bridgestone calls a “Superior Offer,” which grants the board the ability to take some actions. However, the determination doesn’t yet allow them to terminate the agreement with Bridgestone or sign a definitive agreement with Carl Icahn. These two actions may only happen if the rest of the procedures set forth in Bridgestone’s agreement are followed.

In a press release this morning, Pep Boys said its board of directors continues to recommend the deal with Bridgestone and is not making any recommendation on Icahn’s offer at this time.

Shares of Pep Boys began to rise in morning trades today, climbing by as much as 0.93% to $16.21 per share following the announcement from the company’s board of directors.