Bridgestone to Buy Pep Boys for $835 Million

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Bridgestone Corp. (TYO: 5108) has agreed to purchase Pep Boys (NYSE: PBY) for $835 million. The acquisition price equates to $15 a share in cash, which is a 23% premium over the closing price of $12.15 seen on Friday. The acquisition is expected to close at the beginning of 2016.

Bridgestone currently operates over 2,200 service centers all over the United States, and the acquisition will add Pep Boys’ 800+ service shops. The merger of the two companies will create the largest chain of its kind in the world.

Auto-parts retailers are thriving despite a slumping retail market. There are more cars on the road in the United States than ever before, and a large percentage of those vehicles are older. For this reason, there’s an increased demand for auto service centers and auto-parts.

Mechanics are also benefiting from a brand-new generation of high-tech cars as these vehicles have sophisticated parts that are difficult for amateurs to work on and are more costly. With the acquisition, Bridgestone can now offer light vehicle repairs along with tire services and enter the lucrative auto-parts business.

Pep Boys shares rose 23% to $14.95, 62% above its trading price in May, after the announcement of the acquisition.

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