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October 28, 1999

Now CHS Negotiates MBO Deal in Latin America

By CBR Staff Writer

CHS Electronics Inc is planning to sell some of its operations in Latin America to local management in a deal that mirrors the sell-off of 51% of its activities in Germany and Austria to local managers (CI No 3778). No details of the subsidiaries involved in the plan have been revealed and while CHS says it has signed a letter of intent, it says this is subject to financing and creates no binding obligation to sell or purchase.

CHS wants to keep a majority in the South American e-commerce operations which will be transferred to a new organization 51% owned by CHS and 49% by local managers. This is a further reflection of the deal negotiated in Europe and thus is a clear policy of CHS to halve its stake in its international operations in return for some much-needed cash.

Such is the degree of concern over the company’s future that news of a possible deal in Latin America, coming on top of a huge contraction of its other operations, saw the shares rise 8% to $0.81.

CHS boasts on its web site that it is one of the most remarkable business stories of the 1990s. It is living up this billing in a way it hardly expected as the rapid growth and string of acquisitions that took its revenue to $8.5bn last year has been followed by a meltdown on a huge scale.

In its latest 8-K SEC filing, recorded earlier this month, CHS reveals that it still owes $74.4m for the July 1998 purchase of Spanish company Memory Set SA and has agreed to arbitration on how much of the company it will retain for the 8.5% of the price it has actually paid. Pulling out of this deal cost CHS $20m. The company also aborted deals to acquire another Spanish company and two in Turkey and, as a result, will lose a further $27.6m.

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