Billionaire investor Carl Icahn's investment firm and Philadelphia-based Pep Boys - Manny, Moe & Jack said Wednesday that they had reached a deal in which Icahn will buy the iconic but profit-challenged 801-store auto parts, tires, and repair chain for $1 billion, or $18.50 a share.

The cash price is $3.50 a share, or about $150 million, more than Japan-based tire giant Bridgestone agreed to pay for Pep Boys in October.

It is also double what Pep Boys was worth on the stock market last spring, before New York investor Mario Gabelli, whose specialties include auto-related stocks, forced Pep Boys to put three of his allies on its board and pressured the company into promising to look for a buyer.

Just four investors currently own more than half of Pep Boys shares: Gabelli's Gamco funds, 19 percent; Franklin mutual funds, 14 percent; Icahn, 12 percent; and BlackRock, 9 percent.

On Wednesday, Icahn 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, he said 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 resources of Icahn Enterprises," Scott Sider, Pep Boys' CEO, said in the companies' joint statement. "I am confident in Pep Boys' strong future growth prospects" as part of Icahn's empire.

The Icahn Enterprises and Pep Boys' boards approved the merger agreement unanimously, the companies' joint statement said.

Under terms of the deal, Icahn will pay rival suitor Bridgestone $39.5 million to go away. Bridgestone, which operates 2,200 U.S. tire and repair shops under the Firestone brand and other names, announced Tuesday that it would not top Icahn's offer.

Icahn called Pep Boys an "excellent synergistic acquisition opportunity" and a "terrific opportunity" to expand the auto-parts business he entered with his $340 million purchase in June of the smaller Auto Plus chain.

Still to be detailed is how much of that "synergy" Icahn will squeeze from consolidating Pep Boys' Allegheny Avenue offices, which employ 500, with the Auto Plus headquarters in the Atlanta suburb of Kennesaw, Ga.

Icahn was traveling Wednesday and unavailable for comment, an assistant at his New York office said. A spokesman representing Icahn Enterprises declined to comment.

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 of New York in advising buyer Icahn.

Started in 1921, Pep Boys opened its first store at 63d and Market Streets in Philadelphia's Overbrook section. With its cartoon logo depicting three of its founders, the chain quickly became a fixture in neighborhood and suburban shopping centers.

Though Pep Boys' sales have been flat at about $2 billion a year since the mid-2000s, Icahn has said he expects rising sales for the auto-parts industry.

Pep Boys says its 567 retail stores account for about 20 percent of its sales. The company has reported better results for its garages - the majority are attached to stores - and for its tire and fleet-service businesses.

Bridgestone had expected to consolidate Pep Boys management into its Firestone headquarters in Nashville and possibly sell off the stores.

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