Monro gains on takeout potential after Icahn Enterprises sells Pep Boys to Mavis

Monro Inc. (MNRO) rose 2% on the idea that it could be a potential takeover target after Icahn Enterprises (IEP) agreed to sell automotive service chain Pep Boys to Mavis for about $700 million.

Billionaire Carl Icahn's Icahn Enterprises (IEP), which has a 16% stake in Monro, could decide on a full takeover of the company, Oppenheimer analyst Brian Nagel wrote in a note on Tuesday.

"While still speculative, we tend to believe that Icahn Enterprises divesting the company's stake in Pep Boys likely heightens the potential for the organization or another group to eventually acquire Monro," Nagel wrote in the note.Monro (MNRO), which is valued at $525 million, in late May said it was considering strategic alternatives, including a full sale of the company.

Oppenheimer upgraded Monroe (MNRO) to outperform in February, citing the potential sale of the company, especially with Icahn's (IEP) sizeable stake.

Monro (MNRO) is set to report Q1 results on July 29.