Shares of auto parts retailer Pep Boys fell sharply on Wednesday after the chain announced it has ended negotiations with Gores Group LLC, who questioned a proposed $1 billion price tag for the auto parts chain after its latest quarterly earnings fell well short of Wall Street expectations. The stock plunged more than 20 percent just minutes into Wednesday's trading session, though they rebounded as the day went on. With about an hour left in the session, the shares were down about 19.66 percent at $8.91 a share.
The Gores Group had agreed earlier this year to pay $15 a share for Pep Boys, in a plan that would have taken the company private. Gores Group also agreed to a $50 million merger pullout fee in addition to reimbursing the chain's costs accrued from the merger. But when Philadelphia-based Pep Boys issued its first-quarter results on May 1st, Gores Group changed its tune, asking Pep Boys to delay a shareholder meeting scheduled for May 30th so that the results could be examined thoroughly for any factors that might void the deal.
As they have done with the disappointing quarterly figures, Pep Boys downplayed the harm from the end of the deal with Gores Group, offering a decidedly optimistic view of the coming months despite the rocky road the company's been on in recent months. Concerning the poor results, the company has cited a milder-than-usual winter, a dip in consumer spending, and delays in implementing new technologies brought in during recent store conversions. The company says that all of those issues have been resolved, and results should begin improving with the current quarter.