Auto parts chain Pep Boys said it agreed to terminate its proposed $1 billion merger with Gores Group.
As settlement “for any and all potential claims that Pep Boys could assert under the terms of the merger agreement,” Gores Group has agreed to pay Pep Boys a fee of $50 million and to reimburse it for certain merger-related expenses, Philadelphia-based Pep Boys said.
The company also said it canceled its special meeting of shareholders scheduled to be held Wednesday.
The Los Angeles-based private-equity firm had agreed to buy Pep Boys for $15 a share in January. On May 1, Pep Boys disclosed first-quarter sales and net income, which both trailed analysts’ estimates. It also said Gores had asked to delay a shareholder vote set for May 30 to examine the results for a possible “material adverse effect” that could void the deal. Pep Boys declined the request.
“The mild winter weather, restrained customer spending, delays in implementing new technology and disruption during store conversions have impacted recent results,” Chief Executive Officer Mike Odell said in the statement. “Nevertheless, we remain on course with our transformation.”
The company’s “financial position is solid” and it intends to use cash on hand and the settlement proceeds to pay down its term loan this year and then to refinance senior subordinated notes in 2013, Odell said.
Pep Boys will hold a conference call on June 7 to discuss its first-quarter earnings, according to the statement.
The retailer traces its roots to 1921 when four Navy friends pooled $800 to open an auto-parts supply store in Philadelphia, according to the company’s website. Since becoming a publicly traded company 65 years ago, it has grown to more than 700 locations that repair vehicles and sell parts such as tires, brake pads and windshield wiper blades.
In March, Midas Inc., which operates its namesake and SpeeDee automotive service centers, agreed to be acquired by tire supplier TBC Corp. for about $173 million.