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CHS juggles finances following collapse of Vobis buyout

Parent renegotiates earnout payments of subsidiaries

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CHS Electronics stock plummeted two weeks ago and it announced yesterday that it is now renegotiating earnout payments for companies it has acquired, including big-hitters like Metrologie and Karma International. CHS would have the option of paying in cash or stock, reducing the number of diluted shares outstanding. The second aspect to CHS new financing model is to raise cash finance through asset-based lenders. Chairman and CEO Claudio Osoria said the strategy could raise around $800 million, reduce interest debt and enable CHS to buy shares at lower prices. Industry observers say the plan is akin to mortgaging the future and it creates an enormous self-inflicted pressure to get bigger and bigger to fund the earnout payments. CHS stock's 52-week high of 27 fell to 52-week low 4.5, and it's now hovering around 10. When the sale of Metro AG's Vobis Group to CHS Electronics Inc collapsed earlier this week, Metro said the Miami distributor failed to raise the cash, and it warned that it may take legal action against CHS. Metro AG spokesman, Dierke Kowalke, said Metro will take all necessary actions to protect its legal position. "We are in the Schiedsgericht, which is a pre-court arbitration process, discussing our positions and that of Vobis and its subsidiaries, Maxdata and Peacock AG," he explained. Kowalke added: "If the CHS board can find the money then there is no problem." It looks unlikely since Claudio Osorio, CHS chairman and CEO said last week that it was Metro AG that did not meet the sale conditions and he said CHS will safeguard its legal position against Metro AG. ® Click for more stories

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