LAS VEGAS They sort of do, and they sort of don't. In a perfect world, Big O Tires Inc. franchisees-reportedly at least more than 70 percent of them-would like to own the company in which they've invested so much ``sweat equity.''
But recent news that Memphis, Tenn.-based TBC Corp. was considering an offer for the tire franchiser seems to have a lot of Big O dealers re-evaluating their participation with senior management in a leveraged buyout (LBO) of the company.
Then on Feb. 29 Big O announced it was negotiating a letter of intent with TBC, with the latter proposing to buy Big O for a cash price of $16.50 per share-the same offer as the LBO. In part, it is contingent on the LBO being terminated. TBC's offer is subject to several conditions, including a potential reduction in price as provided in its letter of intent.
Under the LBO, dealers have been asked to commit each store they own, in turn receiving shares in a limited partnership that would take publicly held Big O private. However, some have refused to sign up all their stores.
And some dealers interviewed during Big O's annual dealer meeting, Feb. 11-14 in Las Vegas, expressed concern about ``leveraging their future'' for the deal.
Franchisees have imposed a dollar-per-tire ``tax'' on themselves to help finance what would be their 50-percent ownership of Big O. Their having to ante up an estimated $8 million could take six to seven years to pay off.
TIRE BUSINESS was told that Big O's-and TBC's-principal supplier, Kelly-Springfield Tire Co., has agreed to provide an unspecified sum to dealers for the LBO. And as one dealer put it, Texaco Inc.-not currently a Big O supplier-``wants to throw a whole lot of money at us'' to help finance the deal.
But the longer the LBO drags on, dealers and management alike have said, the better a possible acquisition by wholesaler TBC looks.
Even Big O President Steven P. Cloward, who long has dreamed of buying the firm in which he's invested 18 years, admitted that a scenario in which TBC would buy Big O ``makes a lot of sense.''
He called the marketer of tires, batteries and automotive aftermarket products a ``wholesaler's wholesaler''-a lean, ``very well-run organization'' that understands the Big O system, has a lot of buying power, and whose ``interests don't necessarily run contrary'' to Big O's dealers and management.
``TBC has some obvious resources that we'd be hard-pressed to duplicate,'' Mr. Cloward added.
As part of TBC's recent due diligence review of Big O, Mr. Cloward and several other Big O officers and dealers led TBC exec-utives, including President Louis DiPasqua, on a tour of Big O dealerships and warehouses nationwide to learn more about the company and meet with dealers.
Mr. Cloward said he has been assured that TBC would operate Big O as an independent subsidiary, with Big O's management team, for the most part, intact.
He also said financing for the LBO is still tentative, but vowed there would be no ``bidding war'' with TBC for the company. If an offer from TBC was in the best interests of all parties, he said, the LBO group would re-evaluate its stance, and possibly withdraw its $16.50-per-share offer.
One Colorado Big O dealer said his colleagues are ``leaning toward the stability TBC would offer,'' though, ``in a way it's too bad, because a lot of dealers would probably like to own Big O.''
He refused to sign on all of his stores to the LBO, he said, in spite of what he described as ``strong pressure from above'' to do so.
Pete Marrero, co-owner of five Big O stores in the Berkeley, Calif., area and one of Big O's founders, sees ``big benefits'' to dealers whether they or TBC buy the company, though with the latter there is considerably less risk.
He said he has confidence Big O's leadership will ``make the right decision,'' guaranteeing the dealers' ``future and autonomy.''
Regardless of who owns the company, Wes Stephenson, president of the Big O Tire Dealers of America, said: ``We want to focus ourselves and the potential owners on what dealers' priorities are.''
While ``it appears the dealers have the means to complete the LBO,'' he said, ``we also see advantages'' to ownership by TBC, especially in buying power and capability for expansion eastward.