NEWPORT BEACH, Calif.-Depending on which side of the fence you're on, you can either applaud or blame him. Kenneth W. Pavia Sr. could be considered the architect of change at Big O Tires Inc., for it was due to his impetus that the firm found itself courting several buyout scenarios in the past two years.
Mr. Pavia's Balboa Investment Group (BIG), is Big O's second-largest shareholder, with a 9.6-percent stake.
In order to maximize shareholder value, he launched an initiative in 1994 demanding that Big O either be sold, merged, taken private or returned to its roots as a tire dealer cooperative.
The saga recently culminated with the announcement that after a due diligence review of Big O, Memphis, Tenn.-based TBC Corp. had signed a letter of intent to acquire the outstanding shares of Big O at $16.50 per share-about $55 million.
That proposal by the marketer of tires, batteries and automotive supplies all but ended the effort to consummate a leveraged buyout (LBO) by a group of Big O dealers and senior management.
In the hands of publicly-held TBC, Englewood, Colo.-based Big O will become a division.
The pending acquisition still faces approval from Big O share-holders.
``Frankly, TBC was an outfit I had picked out two years ago as one of the more likely marriages with Big O that I could imagine,'' Mr. Pavia said just prior to TBC signing its letter of intent.
Still, he praised the dealers for doing ``a wonderful job putting (the LBO) together.''
However, based on TBC's acquisition, he sees many advantages for dealers, including increased buying power, improved cash flow and efficiency of operations.
Formerly a member of Big O's Investment Committee, which was established to evaluate all offers for the company, Mr. Pavia said he resigned to work closely with the dealers in their LBO effort.
He described them as a ``fine group of people-hard-working, dedicated. I'm an advocate of theirs, and would very much like to see them successful.''
Of course, as a shareholder he also expects to be successful.
Upon instigating the shareholder initiative, Mr. Pavia had said Big O's stock was under-valued, worth at least $20 per share. It has consistently traded between $11 and $15 for the last two years.
Is he content with the $16.50 per share offer?
Yes, ``very satisfied,'' he answered. It is, after all, the same price the dealers negotiated, he added, though admitting: ``I'd rather have $18 per share, but things change. And in this day and age, if TBC is able to step in and get the benefit of what the largest customer of the company was able to get, that would be a major coup on their part.''
In its letter of intent, TBC held out the possibility of offering less than $16.50 per share, pending the settlement of various financial issues. But Mr. Pavia labeled any proposal below that ``misguided.''
Mr. Pavia said Big O today is stronger, has improved with maturity and become leaner and more efficient in anticipation of becoming a private company or a division of another firm.
That has taken ``many months longer than anyone had anticipated,'' he said, because ``there are 390 dealers who have to be provided for,'' so any waning of enthusiasm on their part for the LBO was entirely understandable.