ENGLEWOOD, Colo.-It's going to take perhaps one of their best selling jobs ever. The plan by senior management and franchised dealers to buy Big O Tires Inc. appears to hinge on whether or not they can convince the company's Investment Committee that their most recent offer is fair and equitable.
That may require some pretty fancy footwork, because the committee doesn't seem to agree.
Big O's board and the committee already turned down the group's April 6 bid to purchase the firm for $52.8 million, or $16 per share. They called that too low, and not a fair valuation of the company, especially in light of its rather strong performance in the past few fiscal quarters.
Despite the rejection, representatives of the potential buyers and their own investment adviser, KPMG Peat Marwick of Montvale, N.J., met April 24 with Big O's board, the committee and its investment banker, Paine Webber.
The acquisition group was asked to provide documentation for how it arrived at its valuation of the company, how it will finance the deal, and the quantity of dealer support for the buy-out.
On May 10, the group reported it had provided that information, including written confirmation that more than 85 percent of the company's franchised dealers supported the acquisition proposal.
Wes Stephenson, president of the recently formed ``Big O Dealers of America'' association and an influential Big O franchisee, said the group is ``extremely encouraged by the overwhelming show of support from the dealers.''
Big O President Steve Cloward, who's leading the attempt to buy the Englewood-based retail tire franchiser, told TIRE BUSINESS the group is ``still working with the Investment Committee and board, trying to. . . convince them that it's a fair and equitable price.''
It is a belief ``probably supported by a majority of the shareholders,'' he said, noting that until the group successfully makes its case, ``we're probably not going to have a lot of influence with the committee. And that's pretty paramount.''
The group is ``not in a position to offer any more than what we have, and we think it's a fair price,'' Mr. Cloward said. ``We just have to do what we can to convince the board.''
Nor can he foresee upping the offer-``not under the current structure that we have. No.''
If the board can't be persuaded, and the offer can't be increased, then Mr. Cloward said ``the purchase doesn't seem like a go-not under that scenario. We just take it a day at a time.''
Another meeting between the parties is expected to be held soon.