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Pep Boys Buyout Bound: Third Try A Charm?

As we sent out via Activist Strategy yesterday, The Gores Group thought about buying Pep Boys ($PBY) back in early 2012 - they pulled out and the stock has been a dud. Turns out Golden Gate Capital is “kicking of the tires” now. 

Mario Gabelli’s Gamco Investors is an activist in the name, but it's been a longer-term shareholder with activist intentions of shaking up the board.

In thinking about Pep Boys actually going private, the previous industry transactions have gone for 7x EV/EBITDA; Pep Boys trades at 6.8x forward EV/EBITDA. Gores wanted to buy PBY at 5.9x EV/EBITDA in 2012. There's little upside on the surface. But the real value lies in the real estate. The argument being that when you look at the actual real estate value, you’re getting the operations for “cheap.”

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