NEW ALBANY, Ind.-Big O Tires Inc.-the nation's largest franchiser of independent tire dealerships-will retain an investment banker to investigate selling or merging the company, taking it private or turning it back into a dealer-owned cooperative. Shareholders at Big O's annual meeting June 8, adopted the resolution proposed by dissident stockholder Kenneth W. Pavia Sr. that the board of directors hire a nationally recognized investment banker to ``explore all alternatives'' for enhancing the value of the company-including those options listed earlier.
Mr. Pavia is a Newport Beach, Calif., businessman, whose company, Balboa Investment Group, is Big O's second-largest shareholder, next to the Big O employee stock ownership program.
Since neither Big O's management nor Mr. Pavia's group holds a majority of the company's outstanding stock, adoption of his resolution depended on the votes cast by the company's many small shareholders, and those results were announced at the meeting.
Mr. Pavia said he introduced the proposal because of what he considers the low price of Big O stock rather than any major disagreement with management over the company's direction.
He said he was pleased with the state of the company as outlined by management at the meeting and also with Big O's results for the two most recent months (April and May), which included increases in both sales and earnings.
``Although we're not happy with the company compared to its potential, we're certainly happy with the company,'' said Mr. Pavia, who believes Big O's value is not reflected in its current stock price.
Big O stock, which sells on the over-the-counter, or NASDAQ, market, opened at $15.50 the morning after the 7 p.m. meeting.
Stockholders at the meeting also turned down a board-supported proposal to increase the number of company shares available for stock options and other incentives under Big O's Long Term Incentive Plan.
Asked about these setbacks, securities analyst Harry Millis of Fundamental Research Inc. in Cleveland said it appears shareholders are putting management on notice that they're unhappy with their return on investment.
Mr. Millis said shareholders essentially are telling Big O's management: ``Hey guys, we're not happy with what you're doing with our money....Find a way to earn a realistic return on our investment or get out of the way.''
However, Big O President and CEO Steven Cloward said: ``At no time during the meeting or in subsequent discussions...was there any indication that people aren't happy with what we're doing.
``In fact, some of those individuals who were supportive of the (Pavia) resolution were also very supportive of the actions and policies of the company.''
He said a lot of people are depending on the company-its franchisees and employees, as well as its shareholders. ``Our goal,'' Mr. Cloward said, ``obviously is to come up with a program that looks out for all those entities-and I think we'll do that.''
Only about 20 people attended the meeting, held at the company's regional offices in New Albany, across the Ohio River from Louisville, Ky. Most shareholders voted by mail beforehand. Those in attendance described the meeting as cordial.
Mr. Pavia also said he was pleased with the professional manner in which the board and management promised to carry out his adopted resolution.
``They were very up-front, very gracious and determined to implement the mandates of the shareholders,'' he said.
Big O's board of directors had opposed the measure as an unnecessary expense and potentially distractive to management.
Nonetheless, Mr. Cloward said both the board and management accept the stockholders' mandate and intend to move ``vigorously and expeditiously'' to fulfill it.
Neither Mr. Pavia nor Mr. Cloward said they thought the measure would have an immediate impact on Big O's day-to-day operations.
According to Mr. Cloward, the screening of potential candidates and the ultimate hiring of an investment banking firm will be conducted by Big O's outside directors, leaving Mr. Cloward and Executive Vice President and CFO John Adams, the board's two management members, free to concentrate on day-to-day operations and focus on carrying out the company's five-year plan.
The board, minus Messrs. Cloward and Adams, was to meet June 9 to begin implementation of the proposal, with the final selection of an investment banker to be completed by July 15.