The Los Angeles-based Gores Group could also wind up walking off with a sweet $25 million payday if they can successfully prove the MAC that the New York Times first reported earlier this morning. Or, the PE firm could just be trying to unburden itself of a headache.
The news comes as Pep Boys posts disappointing first quarter numbers, missing expectations yet again for its PE partner. Results were, according to a statement, “below expectations due to a variety of factors occurring in the ordinary course of business”—but Alec Gores’ PE firm clearly doesn’t agree. Shares fell accordingly—perhaps too far.
As the US auto market got off to a strong start for 2012, new customers taking more product off dealer lots is transforming to fewer in the aisles at auto maintenance centers like Pep Boys‘. The company’s stock plummeted 20% on the news the deal could be jeopardized, and investors perhaps undervalued the stock, given the gains that Pep Boys competitors AutoZone, O’Reilly and Advance Auto Parts have made in 2012.
To be clear: Manny, Joe and Jack had long been dumped from the cool kids’ table. Shares fell from above $20 pre-recession, and never galloped back with the rest of the US economy over the last 18 months. Pep Boys go-shopped ‘til they dropped when the Gores Group made a bid, and couldn’t even come up with an offer better than what the PE firm put on the table. Even when Gores did make an offer there was a back and forth that ensued the last time Pep Boys failed to name numbers, and the PE firm wound up offering less. Pep Boys still took it, of course.
Now, it remains to be seen what they can get.