ENGLEWOOD, Colo.-It either will be ``the third time's the charm'' or maybe ``three strikes and you're out'' for Big O Tires Inc. insiders attempting to buy the company. The most recent acquisition pro-posal of $16 per share by the group of franchised dealers and senior management-its second offer in five months-has been turned down by the company's Investment Committee as too low.
But the door hasn't been shut completely.
Big O Chairman John E. Siipola said that, after a review of the offer with the firm's investment bankers, the committee concluded that the proposal in its present form does not represent an appropriate valuation of the company. However, he welcomed another-higher-offer from the group that is led by Big O President Steven P. Cloward.
Mr. Siipola said he had extended an invitation to investment bankers from both the firm and the Cloward group to meet April 24 to further discuss the acquisition. At TIRE BUSINESS' presstime, April 27, it was not known whether the meeting had taken place.
The Investment Committee also expressed concern about the purchasing group's contingency that at least 80 percent of the firm's ESOP (Employee Stock Ownership Plan) members participate in the buy-out.
``We need to see some kind of program so that if the ESOP didn't agree to go along, there would be some way to complete the deal, as opposed to just leaving it hanging after a shareholder vote,'' Mr. Siipola said.
While he wouldn't commit to a specific valuation, the chairman said Big O had been ready to sign a definitive agreement earlier this year with the Cloward group at $18.50 per share. But the group withdrew that offer in February, reportedly after having problems obtaining financing.
For at least the past month, Big O stock has traded between $13 and $13.75 per share, down from a high of $17.13 after the Cloward group's initial offer.
The group's most recent offer also would require the company to pay the buyers' expenses, a contingency Mr. Siipola called ``fairly prohibitive.'' The group's attempt to leverage the deal could indicate it's short on financing, he said.
Big O has had ``three progressively improving quarters with very strong earnings,'' Mr. Siipola said, ``so I think $16 per share is on the low side. And I think most of the investor community would agree with that.''
``Clearly, it's gone on too long,'' he added, referring to attempts since last November to acquire Big O, first by AKH Co. Inc., a large independent California dealership chain, for $18 per share, then the offer by the Cloward group a month later.
``We've got a very good company that's growing,'' he continued, ``and we need to unify this under one form of ownership and move forward-whether that's a change in ownership or moving forward with our (current) restructuring.
``We need to bring this to an equitable close for everyone.''
Though ``not an official downsizing program,'' Mr. Siipola said the company has begun to reduce its overhead and has eliminated several senior-level positions.
In an earlier interview, President Steve Cloward explained that the company has let go its vice president of purchasing, David Dwyer, who won't be replaced. Instead, a lower-level position of purchasing manager will be created. Big O also has eliminated the positions of national director of human resources and of corporate controller, ``and we've thinned down our store development operation by letting a couple people go,'' he said.