Pep Boys Enter Agreement To Be Acquired By Investment Firm, Investigation Into Legality Pending

On January 30, Pep Boys announced that it has entered into a definitive merger agreement under which it will be acquired by The Gores Group, an investment firm led by founder and CEO, Alec Gores. Total enterprise value of the transaction is approximately $1.0 billion.

Under the terms of the merger agreement, The Gores Group will acquire all the outstanding common shares of Pep Boys for $15.00 per share in cash. This represents a premium of twenty-four percent over Pep Boys’ closing price of $12.08 on January 27, 2012 and a premium of thirty-six percent over Pep Boys’ volume weighted average closing price over the last thirty trading days.

Pep Boys’ Board of Directors has unanimously approved the merger agreement and recommended that Pep Boys’ shareholders approve the transaction. It is expected that Mike Odell, Pep Boys’ President & Chief Executive Officer and other members of the senior management team will continue in their roles with the Company after the completion of the transaction.

The agreement provides for a 45-day "go-shop" period and contains customary closing conditions, including receiving the approval of Pep Boys’ shareholders and all applicable regulatory approvals. A special meeting of Pep Boys’ shareholders will be held following the filing of a definitive proxy statement with the U.S. Securities and Exchange Commission (the "SEC") and subsequent mailing of the proxy statement to shareholders. The Gores Group has fully committed financing and the transaction is not subject to a financing condition.

Meanwhile, the law firm of Levi & Korsinsky is investigating the Board of Directors of Pep Boys for possible breaches of fiduciary duty and other violations of state law in connection with the sale of the Company to The Gores Group. Under the terms of the transaction, Pep Boys shareholders will receive $15.00 for each share of Pep Boys stock they own. The transaction has a total approximate value of $1.0 billion.

The investigation concerns whether the Pep Boys Board of Directors breached their fiduciary duties to Pep Boys stockholders by failing to adequately shop the Company before entering into this transaction and whether The Gores Group is underpaying for Pep Boys shares, thus unlawfully harming Pep Boys stockholders. In particular, at least one analyst set a price target of $17.00 per Pep Boys share.

The transaction is currently expected to close in the second fiscal quarter of 2012. Following completion of the transaction, Pep Boys will become a privately held company and its stock will no longer trade on the New York Stock Exchange. Pep Boys noted that, in light of the proposed transaction, it will not host a conference call to discuss financial results for the 2011 fiscal year, but intends to file its year-end results with the SEC. In addition, in anticipation of the transaction, Pep Boys has suspended its quarterly dividend.

BofA Merrill Lynch is acting as the exclusive financial advisor to Pep Boys and has provided a fairness opinion to the Board of Directors of Pep Boys in connection with the transaction. Morgan, Lewis & Bockius LLP is acting as legal advisor to Pep Boys. Credit Suisse Securities (USA) LLC, Barclays Capital, and Sagent Advisors are acting as financial advisors to The Gores Group. Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal advisor to The Gores Group.

NAFA Fleet Management Association
125 Village Blvd., Suite 200
Princeton, NJ 08540

Telephone: 609.720.0882 Fax: 609.452.8004