NEW YORK CITY—If at first you don't succeed, keep going until you outbid your rival. That sums up Carl Icahn's victorious strategy in the bidding war for auto-parts and service chain Pep Boys—Manny Moe & Jack.

Locally based Icahn Enterprises' latest all-cash bid of $18.50 per share, or approximately $1.03 billion, has prompted the Pep Boys board to terminate its merger agreement with Bridgestone Americas Inc., originally announced Oct. 26, and sign a definitive agreement to be acquired by Icahn, announced Wednesday. In turn, Bridgestone said late Tuesday afternoon that it would not seek to make a counter offer.

"This was a terrific opportunity to leverage the financial resources and industry knowledge of Icahn Enterprises to the benefit of Pep Boys' customers, manufacturer partners and employees and further bolster our US automotive footprint," says Icahn, chairman of Icahn Enterprises. "Since our acquisition of Auto Plus, our wholly-owned automotive aftermarket company, in June, we have been actively looking for an excellent synergistic acquisition opportunity like Pep Boys, which has enormous growth potential, strong brand recognition and well-known, best-in-class customer service."

In reporting the successful Pep Boys bid on Wednesday, Bloomberg Business suggested that the $340-million acquisition of Auto Plus, the US automotive parts distribution business of Uni-Select USA Inc. and Beck/Arnley Worldparts Inc., appeared to be a good fit with the Pep Boys deal. Icahn Enterprises will pay Bridgestone a $39.5-million breakup fee in connection with the Pep Boys deal, which enlarges Icahn's auto-service footprint at a time of optimism in the sector.

Assuming that Icahn's $18.50/share offer is brought to fruition, it will mark the culmination of a bidding war that had grown increasingly active in recent weeks. Bridgestone Americas, the US arm of Japan-based tire maker and retailer Bridgestone Corp., originally offered $15 per share to buy Pep Boys in the merger agreement announced this past October.

Earlier this month, Icahn, whose $13.50/share offer was rejected this past September, offered $15.50 per share for Pep Boys after disclosing a stake of approximately 12% in the company. Bridgestone subsidiary Bridgestone Retail Operations matched the Icahn offer, which Icahn then increased to $16.50 per share, an offer that the Pep Boys determined was "a superior proposal." Following the revised agreement with Bridgestone announced last Thursday, the Pep Boys board said it no longer considered Icahn's offer superior.

In an SEC filing, Icahn said it would top any Bridgestone offer by 10 cents per share up to $18.10 per share. However, the Icahn filing said the offer would not apply if Pep Boys and Bridgestone agreed to an increased breakup fee. The two companies did agree to such an increase in the revised merger deal for $17.50/share announced just before Christmas, and that appeared to settle the matter, until Icahn came back this week with an $18.50/share bid and a promise to go even higher if need be.