James, Here's how I understand it. It looks like CVIA is merging with WOTD and together, as a newly merged company, they will acquire numerous individual (but successful) tire stores that (for whatever individual reasons) want to be part of a bigger program.
WOTD is a private company. I suspect WOTD has been working on the idea (acquiring tire businesses,etc) for some time.
WOTD needed to go public to accomplish the goal with rapid growth. CVIA is an attractive public shell with a few assets and a loss carry forward that could help save taxes. CVIA is positioned in the right way, at the right time.
Somehow they ran into each other at an opportune time for both companies. Together, they appear to have attracted some other individuals with the necessary expertise to help them put together a large company.
The program must be attractive to individual tire businesses as well since they are already getting more inquiries.
It looks like the first acquisition will be a $3.5 Million store with $350,000 - $525,000 in profit. As quickly as they have moved to this point, I think it is possible we could see several more acquisitions during the 1Q of 1998.
I assume each acquisition will be in that $1 - $5 Million range in annual sales since that is what they mentioned previously.
To acquire these businesses, I figure they will use some cash (from either profits or loans or a combination of both), some shares (perhaps relatively small amounts with larger amounts tied to incentive performance to help assure continued profits).
At some point, they could possibly have enough in profits to be able to acquire just with cash. However, I would prefer to see them use some shares as incentive to maintain profits as each new store is acquired.
If they run out of shares to offer, then they would have to either increase the available shares or do a rollback. Either way, as long as each new store is increasing profits to an extent that is greater than the dilution of shares it creates, then everybody, including shareholders benefits.
In other words, if new acquisitions create an accretion in profits, everybody WINS! And by consolidating management and accounting, strengthening buying power, and unifying the marketing, a savings can be realized that is substantial. That translates into PROFITS!
The way they appear to be doing this, the plan certainly looks achievable to me.
Again, just my opinions.
Best wishes,
Brad |
