Amstrad sale aids Psion deal

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Amstrad is hiving off its loss-making consumer electronics operation, ACE, in an attempt to make itself more attractive to Psion, the electronic organiser maker that last week said it was planning a pounds 230m bid.

The former engine-house of Amstrad's rise to prominence in the 1980s will be injected into Betacom, a telephone distributor that Amstrad controls through a 67 per cent shareholding. No payment will be made by Betacom for the audio, television, VCR and household goods which are expected to add about pounds 25m of sales to its existing turnover of pounds 15m.

Alan Sugar, chairman of Amstrad, said: "The rationale behind today's move is simply that both ACE and Betacom are essentially similar businesses, buying from the same type of suppliers and selling to the same type of customers. However, both currently have separate infrastructures to support their activities."

The integration with Betacom is expected to push ACE back into the black after three years of losses and will boost Betacom, which last year made profits of pounds 430,000.

Shares in both Betacom and Psion soared yesterday on confirmation of the deal. Betacom doubled in value from 14.5p a share to 29p as the market focused on the benefits of adding Amstrad Consumer Electronics' sales with no large increase in overheads.

Psion shares added 60p to 410p, recovering much of the company's recent lost ground, in relief that the company would not inherit a loss-making operation in a business it had little experience or interest in.

Psion has made it clear that the attraction of Amstrad lies in its Dancall mobile phone operation which it believes will allow it to maintain a lead in the increasingly converging worlds of computing and telecommunications. Psion would also hold on to Amstrad's cable and satellite equipment manufacturing businesses, which are not to be transferred to Betacom with the rest of ACE.