Services Sector Review: Gores Group Buys Pep Boys, DMARC’s Vision

The Pep Boys – Manny, Moe (NYSE:PBY) announced that it has entered into a definitive merger agreement under which it will be acquired by The Gores Group, one of the nation’s leading investment firms, led by founder and CEO, Alec Gores. Total enterprise value of the transaction is approximately $1B.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 24% percent over Pep Boys’ closing price of $12.08 on January 27, 2012 and a premium of 36% percent over Pep Boys’ volume weighted average closing price over the last 30 trading days. 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.

The shares closed at $14.93, up $2.85, or 23.59%, on the day. Its market capitalization is $787.12 million.

PharMerica Corporation (NYSE:PMC), a national provider of institutional pharmacy and hospital pharmacy management services, today commented on the decision by the Federal Trade Commission (NYSE:FTC) to sue to block Omnicare’s (NYSE:OCR) unsolicited offer to acquire PharMerica. We are pleased the FTC has made a prompt decision to resolve the competitive issues surrounding Omnicare’s attempted hostile takeover of PharMerica Corporation, said Gregory S. Weishar, PharMerica Chief Executive Officer. As we have said from the beginning, we believed antitrust clearance would be difficult to achieve and, with that belief now confirmed, we hope that Omnicare will end its hostile pursuit of PharMerica. “We believe PharMerica is well positioned to deliver outstanding value for customers and stockholders as we pursue our strategic initiatives and head into the accelerating wave of generic drug conversions in 2012 and beyond.

The shares closed at $12.61, down $1.69, or 11.82%, on the day. Its market capitalization is $370.70 million.

Google Inc (NASDAQ:GOOG): Return Path announced it is a founding member of DMARC.org, a technical working group dedicated to the development of internet standards for reducing the threat of deceptive emails known as phishing. DMARC has outlined a new vision for email authentication and published a draft specification that resolves the issues associated with widespread adoption of email authentication technologies. Leading Internet service providers, including Google (NASDAQ:GOOG), Yahoo! (NASDAQ:YHOO), AOL (NYSE:AOL) and Microsoft (NASDAQ:MSFT), are founding members of DMARC. Return Path’s anti-phishing solution Domain Assurance supports the DMARC specifications today, enabling companies to quickly and easily implement DMARC.

The shares closed at $577.69, down $2.29, or 0.39%, on the day. Its market capitalization is $187.83 billion.

Amazon.com, Inc. (NASDAQ:AMZN) is expected to report Q4 earnings after the market close on Tuesday, January 31 with a conference call scheduled for 5:00 pm ET. Analysts are looking for EPS of 19c on revenue of $18.2B. The consensus range is (26c)-88c for EPS, and $17.62B-$19.43B for revenue, according to First Call. In October, Amazon forecast Q4 revenue $16.45B-$18.65B and guided approximately 130bps of favorable impact from foreign exchange. The company also guided Q4 operating income ($200M)-$250M, or between a 142% decline and a 47% decline. Earlier this month, the New York Post said Amazon was considering making its video-streaming a standalone, subscription-based service, a move that would place the company in direct competition with Netflix (NASDAQ:NFLX). DigiTimes said ODM orders for the company’s Kindle Fire were set to be cut by half to 3M units in Q1, according to sources in the supply chain. Additionally, the company’s Zappos unit said a hacker may have accessed the personal information of up to 24M customers and the company’s LOVEFiLM signed TV streaming deals with ITV, BBC Worldwide and Disney UK (NYSE:DIS). As for quarterly results, Piper Jaffray believes eBay’s (NASDAQ:EBAY) quarter supports slight upside to the Q4 consensus revenue estimate for Amazon. Stifel Nicolas analyst Jordan Rohan lifted his estimate for the company’s Q4 Fire sales to 6M units from 5M and believes that the Kindle and the Kindle Fire have effectively become the third major mobile ecosystem after Apple (NASDAQ:AAPL) iOS and Google (NASDAQ:GOOG) Android.

The shares closed at $192.15, down $3.22, or 1.65%, on the day. Its market capitalization is $87.38 billion.

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