PORTLAND, Ore.-Another piece of the puzzle has fallen into place. A group of Big O Tires Inc. senior managers and franchised dealers have formed an acquisition corporation, BOTI Holdings Inc., and signed a definitive merger agreement to buy the retail tire and auto service franchiser.
On Aug. 16, Big O reported BOTI has presented financing commitments that in the aggregate will provide sufficient funds to pay the merger consideration.
In early June, based on the recommendation of its Investment Committee, the company's board gave the nod to the group's buy-out bid, which will pay publicly held Big O's shareholders a cash price of $16.50 per share, or about $54.7 million.
Reached while in Portland on a ``road trip'' to the West Coast to meet with groups of Big O dealers, Big O President Steven P. Cloward said the agreement was the first major step in the process to roll the company into their hands.
Among conditions of that agreement, the group led by Mr. Cloward must gain approval of a majority of the firm's stockholders, obtain ``fairness opinions'' on the merger, and receive the backing of 80 percent of the company's Employee Stock Ownership Plan (ESOP) members and at least 85 percent of its franchised dealers.
Before the shareholders can even vote, the company has to prepare a proxy statement and the Cloward group must make good on some of its contingencies, such as financing.
That piece of the puzzle is nearly complete, Mr. Cloward said.
Though some due diligence is yet to be finished, the group has already received a signed letter of commitment on the senior debt side-$40 million from First Chicago Bank. Another sub-debt lender just finished its due diligence, he said, and the group currently is replacing some existing senior notes on Big O's warehouses.
However, he would neither confirm nor deny that Kelly-Springfield Tire Co., Big O's primary tire supplier, was among sources helping bankroll the acquisition, something several dealers have stated privately.
Virtually all Big O's senior management are on board for the buy-out, including John Adams, CFO; Tom Staker, operational vice president; Kelley O'Reilly, marketing vice president; Ron Lautzenheiser, vice president of business development; and the company's corporate counsel, four regional vice presidents and distribution center manager.
On the other hand, Board Chairman John E. Siipola and board member Horst K. Mehlfeldt-who earlier this year engineered the creation of an Office of Chief Executive at Big O and ultimately slashed Mr. Cloward's power-are not participating in the deal.
Given the legal ``t's'' that need to be crossed, Mr. Cloward ventured a guess that the purchase returning Big O to private corporation status might be finalized between October and mid-November.
He's confident the ESOP, which comprises some 80 percent of Big O's rank and file employees, from mid-level management down, will back the plan. Mr. Cloward himself holds the largest ESOP stake, representing about 8 percent, though together, senior management represents less than 20 percent of total ESOP holdings.
While a formal poll has yet to be taken, he said that on his current trip he has met with at least 60 percent of Big O's franchisees, and straw polls reveal ``better than 90 percent'' favor the buy-out.
He believes the acquisition can only strengthen their voice in a firm that grew from the O.K. Rubber Welders, a dealer cooperative.
The dealers ``take a vested interest in their company,'' he said. ``They help make (its) success. . . They certainly control where and how they make their purchases.
``And I believe they'll pull together a lot closer than they are today, and that there'll even be a desire to help each other more than they do today, simply because it's their company.''