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SCH makes cash bid for Fayrewood’s final assets

by Stuart Wilson, Friday 4 July 2008

AIM-quoted distribution house Fayrewood hopes to dispose of its last remaining trading subsidiaries to Prime Properties Development (PPD) – a wholly owned subsidiary of channel giant Specialist Computer Holdings (SCH). PPD has tabled a £2m (US$3.96m) cash bid to snap up server and storage distributor Interface Solutions and also System Loans Services (SLS).

PPD is offering £976,000 (US$1.93m) on completion of the deal with a further £1m (US$1.98m) in the first year subject to potential warranty claims. Interface, which has 130 staff and sales in excess of £129m (US$255.7m) per annum, works with a number of A-brand vendors including Sun, IBM and Lenovo.

Interface and SLS represent the last operating subsidiaries within Fayrewood since the company embarked on a plan to dispose of all its business operations in 2005. The rationale behind this decision was that the aggregate net worth of the businesses, which included ComputerLinks AG, UMD SA and Banque Magnetique SA, exceeded the company’s market capitalisation.

Fayrewood will hold an extraordinary general meeting on July 24th to approve the disposal – a step required under AIM rules since the disposal of the last remaining trading units will result in a fundamental change to the company’s business. Fayrewood’s directors and one major shareholder, who together represent 44.5% of the ordinary share capital, have pledged to vote in favour of the disposal.

David Kleeman, non-executive chairman at Fayrewood, said: "Fayrewood floated in July 1996. Altogether, over the following few years as a listed company, it raised a little in excess of £34 million by the issue of shares, of which less than £10 million was used for working capital purposes and the balance was used to pay vendors during our active acquisition period. On the other side of the equation, we have received in excess of £82.5 million from the sale of our businesses since 2005. In addition, approximately £30 million of bank debt was assumed by the purchasers of those businesses.”

“I believe we have demonstrated an ability to bring value to shareholders, a large part of which is due to the very judicious deal-making skills of both our former and current management team when the underlying businesses were bought. As important, was the decision to take action two years ago when we realised that the increasingly testing market conditions Europe-wide and Fayrewood’s market rating were not conducive to remaining as a quoted entity, particularly as investors were demonstrating a limited appetite to fund a long-term acquisition strategy. Accordingly the Board of Fayrewood unanimously recommend approving the disposal,” he added.

Fayrewood will also use its upcoming EGM to agree on its future investment strategy for the funds generated from the disposal of its business operations. While a return of funds to shareholders is an option, the company has not completely ruled out getting back into the distribution game.

Fayrewood’s statement on its investment strategy read: “Although the Company will not actively seek any acquisition or investment opportunities going forward, it may consider active investments in distribution businesses in Europe in order to assist in part or in full in effecting its investing strategy.”

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