Amstrad denies buy-back plan

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The Independent Online
AMSTRAD, the consumer electronics group, has quashed stock market speculation that Alan Sugar may be planning another bid to return the company he founded to private control.

Rumours of a possible buy-back surfaced last week following the abrupt departure of David Rogers, Amstrad's chief executive, who was in charge of the loss-making computer and electronics division, ACE. Mr Rogers resigned after refusing to implement a drastic overhaul of the business that he was supposed to expand.

But this weekend Michael Beckett, one of two non-executive directors appointed to the Amstrad board in 1993, rejected suggestions that Mr. Sugar was pondering a buy-back.

"He tried it once, and still thinks he was right, but at no time since has he made any reference to wanting to buy Amstrad back."

The stock market's adverse reaction to the ousting of Mr Rogers is likely to exacerbate Mr Sugar's long-standing antipathy towards the City and could prompt him to look again for a viable exit route. Shares in Amstrad plunged after the announcement on Thursday and have lost a third of their value in just two months, though they managed a minor rally on Friday to close at 196p.

Investors also fear that Mr Rogers's departure, after just 16 months of being nominally in charge, is a clear sign that Mr Sugar is reverting to the assertive, hands-on style of management that culminated three years ago in a failed attempt to buy the two-thirds of Amstrad shares he did not own.

Mr Sugar's cheeky, low-ball bid at the equivalent of 150p was rejected by shareholders, who were angry that he had sold a 7.5 per cent stake a year earlier at 400p. They feared Mr Sugar, ever the trader, was trying to acquire Amstrad on the cheap.

Analysts busy calculating Amstrad's likely break-up value said another buy-back bid was possible. "Mr Sugar could come back with an offer of pounds 2 a share," said Andrew Bryant of brokers NatWest Markets. "But if he genuinely believes Dancall (Amstrad's mobile phone operation) is the next Nokia, he would have to pay 250p." He estimates Amstrad is worth 245p on a sum-of-the-parts basis, almost half of which is made up from its pounds 140m cash pile.

Another option for Mr Sugar, who is also chairman of the quoted football club Tottenham Hotspur, is to reduce his 35 per cent stake in Amstrad. But that would not please institutional investors, who would view any share sale by Mr Sugar as a vote of no-confidence in Amstrad's prospects. The group recently reported its first profit in four years but warned that trading conditions remained difficult.

In the meantime, Mr Sugar's involvement in the day-to-day running of Amstrad will increase - at least until a new chief executive to work alongside him is found. It took Amstrad 18 months to appoint Mr Rogers and efforts to draw up a short-list of possible successors have been hampered by the protracted Christmas and New Year holiday.

Officially, Mr Rogers will step down on 12 January - the day after he returns from a three-week holiday in the West Indies. His three-year contract entitles him to an estimated pounds 240,000 in compensation.

More details on the proposed restructuring at ACE are expected in February. In the past, Mr Sugar has threatened to close ACE if losses cannot be stemmed. Production of fax machines and video recorders may now stop, but analysts expect the rest of the business to be slimmed down and merged with Amstrad's recent acquisitions - the mobile phones manufacturer Dancall and the Viglen direct sales personal computer company.