Icahn Enterprises LP, billionaire Carl Icahn's investment firm, and Pep Boys -- Manny, Moe & Jack, the iconic but profit-challenged, 801-store, North Philadelphia-based auto parts, tires and repair garages chain, said this morning they have cut a deal for Icahn to buy Pep Boys for $18.50 a share, or $1.03 billion.

The price is an extra $3.50 a share -- and about $150 million -- more than Firestone stores owner Bridgestone agreed to pay for Pep Boys in October. Under terms of the new deal, Icahn will pay Bridgestone $39.5 million to go away. (Bridgestone said last night it won't beat Icahn's offer.) The Icahn and Pep Boys boards have approved the cash deal unanimously.

Icahn, in a statement, called Pep Boys an "excellent synergistic acquisition opportunity" and a "terrific opportunity" to expand the auto parts business, which he entered with his $340 million purchase of the smaller Auto Plus chain in June. He hasn't yet detailed how much of that synergy will involve consolidating Pep Boys' Allegheny Ave. offices, which employ 500, with Auto Plus headquarters in Kennesaw (near Atlanta), Georgia. (Bridgestone had expected to consolidate Pep Boys management into its Firestone headquarters in Nashville, Tenn.) 

Icahn wasn't immediately available at his New York office to say more. In his statement, he called Pep Boys a "terrific opportunity" even at the higher price. Defying analysts' concern that Pep Boys is a perennially slow-growing player in a mature market, Icahn added that Pep Boys enjoys "enormous growth potential, strong brand recognition, and well-known, best-in-class customer service."

Pep Boys will "benefit from the significant expertise and resoruces of Icahn Enterprises," added Scott Sider, Pep Boys' CEO. "I am confident in Pep Boys' strong future growth prospects" as part of Icahn.

Buyer and seller expect to close the deal by March. Philadelphia law firm Morgan, Lewis & Bockius advised Pep Boys on the sale and Philadelphia's Drinker Biddle & Reath joined Proskauer Rose advising Icahn.