Pep Boys Merger Canceled, Shares Plunge

by Christopher Freeburn | May 30, 2012 12:09 pm

Pep Boys Merger Canceled, Shares Plunge

Auto-parts chain Pep Boys (NYSE:PBY[1]) announced yesterday that it has ended its planned merger[2] with Los Angeles-based private equity firm Gores Group.

Under the merger, announced in January, Gores would have paid $15 a share for Pep Boys, valuing the retailer at almost $1 billion, according to Bloomberg. Shares of Pep Boys plummeted more than 21% in Wednesday trading, falling under $9.

Some Pep Boys investors, including Sophis Investments said the Gores offer undervalued the retail chain.

After Pep Boys released first-quarter results, which missed analysts’ forecasts,┬áin early May, Gores requested additional time to study the results, noting that they might contain information that could terminate the deal.

Pep Boys refused to delay a shareholder vote on the merger that had been planned for today.

Gores will pay Pep Boys $50 million to compensate the company for expenses pertaining to the proposed merger. The retail chain would have owed Gores $25 million had it received a higher bid, or if shareholders had rejected the deal.

Endnotes:
  1. PBY: http://studio-5.financialcontent.com/investplace/quote?Symbol=PBY
  2. ended its planned merger: http://www.reuters.com/article/2012/05/30/us-pepboys-shares-idUSBRE84T0PE20120530

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