ENGLEWOOD, Colo.-Big O Tires Inc.'s second-largest stockholder believes shareholders will adopt his proposal to consider selling or merging the company, taking it private or turning it back into a dealer-owned cooperative. Kenneth W. Pavia Sr., dissatisfied with the performance of Big O stock, won't know for certain whether his motion has garnered the votes needed for adoption until shareholders mail in their proxies and the results are announced at Big O holds annual meeting, June 8, at the firm's regional sales and service center in New Albany, Ind.
``But if everybody who has contacted me votes the way they indicated, we should have plenty of votes,'' the Newport Beach, Calif., businessman told TIRE BUSINESS.
Specifically, Mr. Pavia's proposal calls for hiring ``a nationally recognized investment banker to explore all alternatives'' for enhancing the company's value.
``What we're attempting to do,'' he said, ``is get the company to be more aware of its owners. And the way we're doing that is to say to hire an investment banker to find out what other options we-the shareholders-might have. Then compare those options with the plan that's now in place and make a decision that is in the best interest of the shareholders.''
Meanwhile, as part of what was called a comprehensive investor relations program, Big O has hired an outside investor relations firm to represent its interests to shareholders and the financial community at large.
Big O's board of directors opposes Mr. Pavia's proposal, contending that engaging an investment banking firm would not only be expensive but might deter and distract management from implementing its present business plan.
In the firm's proxy document, the board noted Big O Tire's share price has outperformed the NASDAQ Market Index since 1991.
Also in an effort to dissuade shareholders from endorsing Mr. Pavia's proposal, the Big O board recently sent a letter to each, underscoring reasons why they should vote against it, explaining that if they had already cast their vote, they could still change it.
The statement-signed by Steven P. Cloward, Big O president and CEO, and John E. Siipola, board chairman-included a statement of support by board member Frank L. Carney, who called the proposal a ``needless and costly distraction'' that could jeopardize the future profitability of Big O.
Mr. Pavia is a general partner in Balboa Investment Group which holds a 9.4 percent stake in Big O. The franchiser's largest stockholder is its own Employee Stock Option Program (ESOP), which controls about 19 percent of the firm's shares.
Individually, Big O's directors and executive officers own a total of 5.42 percent of the stock, giving the board and management potential control over 24.4 percent in total.
Since neither side has a clear majority and there are no other large-volume stock owners, the issue will be determined by majority vote of the company's smaller shareholders.
Big O announced May 16 it has retained The Financial Relations Board, a Chicago-based company, said to be the largest investor relations firm in the U.S., with offices in Chicago, New York, San Francisco and Los Angeles.
In a prepared statement, Mr. Cloward said The Financial Board will support management's efforts to ``make the financial community aware of the strong performance and growth potential'' of Big O.
Management also took the opportunity to declare that the company's growth prospects are strong in light of:
Its new supply agreement with Kelly-Springfield Tire Co. to produce Big O brand tires, which officials predict will increase in importance from 52 percent to 75 percent of the chain's total tire sales over the next three years;
A new franchise arrangement designed to allow Big O to increase its locations by 30 or more stores a year without incurring additional capital expense;
A new 300,000-sq.-ft. mega warehouse, now under construction in Henderson, Nev., near Las Vegas, which when fully operational in 1995 will replace three current warehouses, thereby reducing operating expenses by $1 million per year.
Contacted by telephone, Mr. Cloward denied any connection between Mr. Pavia's current proxy proposal and The Financial Board's hiring, instead describing the move as something Big O had intended to do for some time.
Mr. Pavia, however, said he has recommended to management repeatedly over the last two years that they retain an outside investor relations counsel-only to be told such a move was unnecessary.