Loss-struck Canadian-headquartered equipment dealer Strongco has sold its US operation, Chadwick-BaRoss, for US$12.8 million (€11.5 million). Strongco sold the business to ISH Capital.
Strongco said was shedding the US operation to help keep the rest of its business afloat. “Cash flow from operations was negative in 2014 and 2015, and several times over the past two years the company has breached financial covenants,” it said.
“While revenues have been more stable in the first half of 2016, gross margins were down noticeably... the current financial situation is no longer sustainable and the company cannot wait to realise the results of these actions or for markets to recover.”
Given the company’s current financial position, Strongco said its management and board had determined that an injection of additional new cash was essential, and the sale of Strongco’s US subsidiary, Chadwick-BaRoss, was potentially the best means to provide additional financial resources in the short-term, until market conditions improved.
In addition to the proposed sale of Chadwick-BaRoss, the reduction in staffing and general expense control measures, Strongco said it had also adopted a salary deferral program for its senior leadership team and directors to further improve cash flow.
Strongco executive chairman Robert Beutel said, “I remain optimistic that the goal of getting our Canadian operations back on stable footings for the future is within reach.
“The disposition of Chadwick-BaRoss would provide us the funds to assist our recovery. With the advantage of hindsight our previous expansion was poorly timed, but we are refocusing to create the most value for our customers, employees and our shareholders.”