Specialist Computer Holdings has bought the last two trading subsidiaries of Fayrewood for a knockdown £2m. The subs are Interface Solutions International Limited, a well known UK distie, and System Loans Services Limited, a minuscule company that dresses up IBM X servers for sale.
Fayrewood's board said the disposals vindicate the company's strategy of selling off its trading arms to reduce debt and to return money to shareholders. The company is now effectively a cash shell, but its AIM listing should mean that someone will want to buy it through a reverse takeover, as a cheap way of getting a stock market quotation.
In kinder, gentler times Fayrewood was an investment-driven mini-conglomerate, which sought to roll-up computer distribution outfits in the UK and Continental Europe. But it then let the subsidiaries run themselves separately, which means that economies of scale were less than the size of the group would otherwise suggest.
Time has been less than kind since the mid-Nineties, when Fayrewood formed: hindsight tells us that only a fool or a madman would volunteer to buy shares in a tech distie. This is a scary business to be in and only the biggest and the best can make money at it.
Fayrewood's board certainly thinks so: it threw in the towel in 2005 by announcing that everything was up for sale. Already, three disties - Computerlinks, of Germany and UMD and Banque Magnetique, of France have been sold, netting Fayrewood £65m (we think).
Specialist Computer Holdings is said to be the UK's biggest private company and over the years has made a habit of buying distressed computer resellers and distributors. For its £2m, spread out over 12 months, it is adding a lot of bulk: Interface turned over £130m in 2007. The distie also lost £571k before tax.
SCH has the scale to make big cost savings - cash management, warehousing, staff, couriers, buying and so on. But to maintain revenues at current levels, the company would need to maintain credit levels for Interface's customers. Credit lines, often, are a casualty, when one distie buys another - seeing what their customers owe to their acquisition makes them a little nervous.
SCH, still run by its founder, the legendary Sir Peter Rigby, and family, certainly has the cojones and, judging by the price he is paying for Interface and SLS, much better dealmaking skills than Fayrewood. His agreed offer is subject to warranties - in other words, if something nasty crawls out the woodwork, SCH won't be paying out the full amount.
As is often the case, the disposal is subject to approval from Fayrewood shareholders. Fayrewood's press release is here. ®