Pep Boys shares climbed today after the release of a regulatory filing indicated that activist investor Carl Icahn’s firm, Icahn Enterprises, will pay up to $1 billion to acquire the automotive repair chain. Pep Boys stock climbed by as much as 3.55% to $17.49 per share during regular trading hours today, staying just under the maximum per-share buyout offer of $18.10 per share given in the SEC filing.

 

Pepboys Pep Boys
Chart via S&P Capital IQ

Icahn now determined to win Pep Boys

Today’s regulatory filing indicates that Icahn Enterprises will automatically top any competing offer from Bridgestone to acquire Pep Boys by 10 cents per share, up to $18.10 a share, which would be a valuation of $1 billion. If Bridgestone wants to top that offer, however, it will have move quickly. The Japanese tire maker has only until tomorrow night to submit a better offer, according to the SEC filing, which states that Pep Boys has notified Bridgestone that the company will terminate their agreement to take Icahn’s offer.

S&P Capital IQ estimates that Icahn holds about an 11% stake in Pep Boys. Both Icahn’s and Bridgestone’s offers include breakup fees of $35 million. However, if Pep Boys’ board decided that Icahn’s offer constituted one that’s superior to the offer from the Japanese tire maker, then the $35 million breakup fee would not be owed to Bridgestone for the October agreement. In today’s regulatory filing, Icahn’s proposal will not apply if Pep Boys accepts an offer from Bridgestone that would require it to pay a breakup fee.

Icahn in a fight with Bridgestone for Pep Boys

Today’s regulatory filing is just the latest shot in what quickly came a huge bidding war between Icahn, who wants to merge the company with a competing company he owns, Auto Plus, and the Japanese tire maker Bridgestone. The Japanese firm originally entered into a definitive agreement to buy Pep Boys in October for $15 per share, all in cash, for a total equity value at that time of about $835 million. Roughly six months ago, Carl Icahn’s firm was considering paying $13.50 a share for Pep Boys.

Then he ratcheted up the pressure on the Japanese firm with a surprise offer earlier this month, which resulted in a new $15.50 per share offer from Bridgestone to match his latest offer at that. Icahn again topped that bid on Friday with yet another offer of $16.50 per share, which amounted to about $919 million.

The auto repair firm’s board of directors had already decided that the activist investor’s offer was superior to that from Bridgestone and had intended to terminate the agreement unless the company offered more money.