CHS Electronics has firmly put its financial problems behind it after revealing plans to raise #250 million via a share issue.
The cash injection comes at the same time as CHS confirmed its purchase of PC components distributor Karma International for $160 million. CHS will pay $74 million cash plus $86 million in stock.
Talks between CHS and Karma were first revealed in April, after it emerged that CHS wanted to buy the distributor to strengthen its position in the systems builder market (PC Dealer, 30 April).
In a filing to the US Securities & Exchange Commission, CHS stated that it would offer 10 million shares, seven million of which would be offered to US institutions, with the rest coming from Europe investors.
Jan Lawford, sales and marketing director at CHS, said the company wanted European investment because more than 80 per cent of business came from the continent.
Although the price of the shares has not been determined, CHS? share price is currently $25, which would raise #250 million.
CHS has been under attack from its vendors for not paying its bills, with the result that credit terms had to be renegotiated. In May, D-Link issued a High Court writ for #70,755 over an unpaid bill.
Lawford said the cash injection would be used partly to finance the Karma acquisition and give the company some working capital. The money will also be used to fund further acquisitions, but there are no specific plans. Karma will be run as a separate CHS subsidiary and will retain all of its management. Karma UK managing director Ron Golan is remaining with the distributor.
CHS has expanded its regional coverage and is now based in Spain, Italy, Greece, Turkey and The Netherlands.
Karma had a turnover of $700 million and net profit of $15 million in 1996. The deal between CHS and Karma is expected to be completed in August.
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