Billionaire investor Carl Icahn has set a Christmas Eve deadline on the bidding war for Philadelphia's marginally profitable Pep Boys - Manny, Moe & Jack auto-parts chain.

Icahn on Wednesday promised to pay $16.50 a share - or "10 cents more per share" than the rival Bridgestone tire group's best offer - and to increase it to as much as $18.10 a share or more than $1 billion. The catch is that Pep Boys has to agree to his deal by 8 p.m. Thursday. After that, Icahn's proposal would expire.

Subsequently, Pep Boys said Wednesday that Japan-based Bridgestone has until 5 p.m. Thursday to beat Icahn's offer for the iconic company. Pep Boys shares closed Wednesday at $17.40 a share, up $0.51, or 3.02 percent.

In October, Bridgestone agreed to pay $15 a share, or more than $800 million, for Pep Boys, which generates sales of more than $2 billion a year. Then Icahn entered the picture and forced the bidding war.

Bridgestone wants to join Pep Boys' 800 stores and tire and fleet-service operations, which have reported modest growth, to Bridgestone's 2,000-store Firestone chain, based in Tennessee.

Icahn wants to combine Pep Boys' retail stores, whose sales have been flat, with his smaller, Georgia-based AutoPlus chain, which he bought earlier this year.

After failing to meet Bridgestone's bid in October, Icahn offered $15.50 a share earlier this month. Each side has since sweetened bids.

On Wednesday, Nikkei Asia Review reported that "Bridgestone has decided once again to raise its offer," without adding details of the higher bid.

Either deal could lead to layoffs or relocations for many of Pep Boys' 500 employees at its Allegheny Avenue headquarters.

Regional parts retailers such as Pep Boys face stiff competition from AutoZone and a few other national chains that have expanded store networks and reported stronger profits in recent years.

Since Icahn and Bridgestone appear to be interested in different parts of Pep Boys' operations - the retail stores, and the garage and tire operations, respectively - analysts have suggested the two might ultimately split the company.

But Icahn, as a major Pep Boys shareholder, has incentive to want to push Bridgestone's price higher, said Robert Costello, head of $100 million-asset Costello Asset Management in Huntingdon Valley.

Pep Boys, which began in 1921 in West Philadelphia, has sought buyers several times since 2006, including an announced offer in 2012, and its share price has trailed faster-growing competitors such as AutoZone.

The company's first auto-parts store opened at 63d and Market Streets in the city's Overbrook section by Navy veterans Manny Rosenfeld, Moe Strauss, Moe Radavitz, and Graham "Jack" Jackson.

The chain, with its cartoon logo of three of the founders, quickly became a fixture in neighborhood and suburban shopping centers.

(215)854-5194 @PhillyJoeD