The $15 per share offer is a 24 percent premium to Pep Boys' closing price Friday of $12.08.
The company's shares surged $3.08, or 25.5 percent, to $15.16 in premarket trading Monday.
Pep Boys, which is based in Philadelphia, has more than 700 locations in 35 states and Puerto Rico.
The proposed acquisition appealed to The Gores Group in part because of Pep Boys brand recognition, as well as its moderate pricing.
"Pep Boys' strong brand awareness and management's strategy to be the automotive solutions provider of choice for the value-oriented customer positions Pep Boys for growth. We are excited to help Pep Boys build on this vision and enable the company to take the brand and business to the next level by effectively scaling its powerful differentiated service platform," Lee Bird, managing director of operations and consumer practice leader at The Gores Group, said in a statement.
Last month Pep Boys reported that its fiscal third-quarter net income rose nearly 23 percent on stronger tire sales and improving service sales. At the time President and CEO Mike Odell said that the improved business was due in part to new marketing, lower gas prices and pent-up demand.
With almost 53 million shares outstanding, the deal is worth about $791 million. The companies put the total enterprise value of the deal at approximately $1 billion.
The agreement includes a provision, which allows Pep Boys to seek and receive alternative offers for a period of 45 days.
Gores Group said that it has fully committed financing for the buyout. The deal is not subject to a financing condition.
Pep Boys said that Odell, as well as other senior managers, are expected to remain in their positions once the acquisitions closes.
Pep Boys' board unanimously approved the buyout, which still needs approval from the company's shareholders. Pep Boys said it has suspended its quarterly dividend in anticipation of the deal.
The transaction is expected to close in the fiscal second quarter. Once the acquisition is complete, Pep Boys stock will no longer trade on the New York Stock Exchange.
