Icahn: Pep Boys' service biz 'very attractive'

NEW YORK (Jan. 12, 2016) — Icahn Enterprises L.P. sees Pep Boys – Manny, Moe & Jack's auto service operation a “very attractive” new line of business for Icahn's IEH Auto Parts L.L.C., the holding company for its Auto Plus automotive parts business.

In a Schedule 14D-9 filing with the Securities and Exchange Commission, Icahn also said it sees the Pep Boys brand as having “strong brand equity” that it intends to continue using, although with one caveat: “Just how it will be used in conjunction with the newly launched Auto Plus brand remains to be determined.”

For now, Pep Boys and Auto Plus continue to operate separately, Icahn said, but subsequent to completion of the acquisition of Philadelphia-based Pep Boys by IEP Parts Acquisition, “It is anticipated that…Pep Boys will be combined with Auto Plus.”

Regarding the service business — which represents about a quarter of Pep Boys' $2 billion in annual revenue — Icahn said, “In the near term, Pep Boys will continue to operate the vehicle service business as we evaluate longer-term strategic alternatives.”

Icahn did not make specific reference to Pep Boys' 238 Service & Tire Center locations, which do not retail auto parts on site.

Among other topics Icahn addressed in a Q&A format intended for Pep Boys' employees were:

• Store location overlap: “There is very little overlap between our stores. The major reason for the acquisition is that it accelerates Auto Plus' growth strategy to become a leading North American automotive aftermarket distributor in the United States.”
• Pep Boys' distribution centers: “Part of Auto Plus' stated strategy is to build out its distribution network. The addition of Pep Boys' distribution centers fits squarely within that strategy. Auto Plus…operates 22 distribution centers and views Pep Boys' DCs (distribution centers) as becoming an important part of its new and larger distribution network.”
• Pep Boys' store support center in Philadelphia: “At least in the near term, the store support center will continue to serve as the hub of Pep Boys' operations. Auto Plus' headquarters is located in Kennesaw, a suburb of Atlanta, Ga. As we combine operations, we will assess the best way to empower and support our stores and distribution centers for success.”
• Long-term opportunities for Pep Boys employees: “While we believe there will be many opportunities with Auto Plus, if there is no long-term opportunity for you, you will receive advance notice and Icahn Enterprises will honor Pep Boys' current severance policies for at least one year following (the deal's) closing.”

Additionally, Icahn said, “Under the merger agreement, for one year after closing, the compensation and benefits paid to current Pep Boys associates cannot be materially less favorable than current compensation and benefits (other than equity-based compensation, which will be discontinued at closing since Pep Boys' stock will cease to be publicly traded).

“Icahn Enterprises values its employees and is committed to offering competitive compensation programs to attract and retain the best talent.”

Icahn Enterprises said its Auto Plus business employs more than 3,700 in approximately 300 locations in the U.S. Auto Plus formerly ws owned by Uni-Select, a Canadian company. Icahn acquired Auto Plus from Uni-Select in June 2015.

By combining Auto Plus and Pep Boys, Icahn Enterprises has “accelerated its plan for Auto Plus to be a leading North American automotive aftermarket distributor in the United States.”