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CHS sheds seven to boost confidence

Divisions handed back to original owners as debt slashed

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CHS Electronics is culling seven of its operations in a bid to cut debts. The distributor said it had returned its interests in four subsidiaries to the original owners of each company in non-cash deals. It will keep a small part interest in each company, with an option to re-buy the rest later. In a company statement, CHS said this would reduce outstanding debts by around $146 million, in what is the first of a string of announcements aimed at regaining the confidence of the market. It is also in similar talks with the original owners of three other subsidiaries to cut outgoings by a further $81 million. This would reduce its debts from the $229 million owed on 30 June 1999 to $72 million. For the first six months of this year, the seven groups made sales of $516 million, or around 11 per cent of CHS' total revenue, with net profit of $15.6 million. Peter Rigby, CHS group marketing director, said the company was not disclosing which companies were effected by the move. The only clues given were that all seven were acquired by CHS in the first half of 1998, with five located in Europe and two in Latin America. This points towards Metrologie, the French-owned company bought for $87.7 million in a deal finalised in April last year. Also acquired during the period were Raphael in Italy, and Mc Dos in Germany and the Netherlands. Rigby said none of the companies affected were in the UK. "These moves reduce the debt on the balance sheet," he said. "There have been a number of issues that we had to show potential resolutions to. Vendors were looking at our credit limits. There will be further announcements over the next few days to re-build confidence to our lenders and suppliers," he added. CHS will gain an extra $155 million of working capital if all seven deals go through. Goodwill will be cut by $222 million and net worth will go up by $165 million to $42 million. Exceptional items of $59 million related to the seven transfers are expected to be recorded in the fourth quarter. The move follows CHS losing its franchise with Intel earlier this month. ®

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