Sugar breaks Amstrad empire

Alan Sugar yesterday announced the break-up of Amstrad, the consumer electronics business he created 29 years ago and which brought low-cost personal computers into the home for the first time.

The dismantling of the Amstrad empire will net Mr Sugar more than pounds 100m and return more than pounds 200m in cash to shareholders. It will also ends the Essex entrepreneur's often turbulent relationship with the City since he floated Amstrad in 1980.

Under the complex restructuring unveiled yesterday, Mr Sugar is proposing to return pounds 200m to shareholders in the form of loan notes and exchange Amstrad shares for shares in two subsidiary companies Viglen Technology, which sells Amstrad PCs by direct mail, and Betacom, a quoted consumer electronics company which markets the Amstrad, Sinclair, Fidelity and Betacom brands.

In addition, Amstrad plans to distribute to shareholders the proceeds of damages awards against two US suppliers of computer disks. The award against one of the companies, Seagate Technologies, should exceed pounds 100m including interest payments.

The dramatic break up of the Amstrad follows Mr Sugar's failure to merge the business last year with Psion, the hand-held computer group, and his earlier abortive attempt in 1992 to take Amstrad private.

According to some estimates the break-up and distribution of assets could be worth 360p per share against yesterday's closing price of 277p, up 13.5p. That would value Amstrad at pounds 425m compared with a market capitalisation of pounds 1.2bn in 1988 and leave Mr Sugar with a stake worth about pounds 145m.

However, much will depend on the value put on Viglen when it is floated as a separate company. There were suggestions yesterday that it could be worth as much as 115p a share although Robert Harris, an analyst with ABN Amro Hoare Govett put Viglen's value at 65p a share. The company made a pounds 10.5m profit last year on sales of pounds 106m.

Mr Sugar, Amstrad's biggest shareholder with a 34 per cent stake, refused to say what he would do with his proceeds from the break-up. But he stressed that although the Amstrad name was disappearing as a quoted company it would continue as a powerful brand.

Mr Sugar will remain chairman of Betacom and will devote his energies to building up the business. But he will have no executive role at Viglen while Amstrad will be reduced to acting as a vehicle to pursue the litigation in the US.

"My focus will now be on Betacom which is where Amstrad was as a company 10 years ago," Mr Sugar said. "In years to come a suitable epitaph would be for Betacom to prove as sexy a business as Amstrad."

Analysts generally welcomed the break-up plan unveiled by Mr Sugar. Michael Styles of Credit Lyonnais Laing said: "It makes sense. There may be a little more to go on the share price - it depends what you think Viglen is worth."

Mr Sugar formed Amstrad - Alan Michael Sugar Trading - in 1968 and built its profits up to pounds 1m by mass marketing hi-fi equipment manufactured in the Far East at discount prices. It floated in 1980 and quickly went into the computer business, first with games computers, then with word processors and then with a low-cost industry standard personal computer which revolutionised the PC market.

Amstrad hit a peak in 1988 as its profits reached pounds 160m and the market capitalisation of the company hit pounds 1.2bn. It went on to sign a deal with Rupert Murdoch's Sky to manufacture and market its satellite dishes in 1989.

The downturn in the company's fortunes coincided with its attempts to break into the business PC market with a machine using disk drives supplied by two US manufacturers.

Amstrad was last month awarded pounds 57.6m in damages against one of the companies - Seagate Technologies and is pursuing a similar claim against Western Digitalk, which is due to reach court in Orange Country, California later this year.

The pounds 200m loan note convertible into cash is worth 163p a share and represents the bulk of Amstrad's cash pile, which has just been inflated by the pounds 92m sale of the cellular telephone business Dancall to Bosch of Germany.

Amstrad's 70 per cent holding in Betacom is worth a further 25p a share and assuming the Seagate damages award reaches pounds 100m, it is worth a further 55p-58p per share.

Although Amstrad will cease to exist as a quoted company a spokesman said: "It doesn't matter a damn to the consumer who now owns the brand, it will continue to be a powerful name in the high street."

As well as personal computers, Amstrad also markets hi-fi equipment, televisions, cordless phones, faxes and answering machines. None of its later consumer electronics products have had the same impact, however, as the IBM clone of a PC that Amstrad pioneered in the 1980s.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
filmPoldark production team claims innocence of viewers' ab frenzy
Life and Style
Google marks the 81st anniversary of the Loch Ness Monster's most famous photograph
techIt's the 81st anniversary of THAT iconic photograph
Katie Hopkins makes a living out of courting controversy
All the major parties are under pressure from sceptical voters to spell out their tax and spending plans
ebooksA special investigation by Andy McSmith
Arts and Entertainment
Kevin Spacey and artistic director Matthew Warchus at the Old Vic party to honour Spacey
theatreStar's successor at Old Vic theatre admits he's 'allergic to hype'
Life and Style
life + healthVirginia Ironside's dilemma, during Depression Awareness Week
Arts and Entertainment
The median income for professional writers is just £10,432, less than the minimum wage
booksSurvey reveals authors' earnings
Life and Style
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Pricing Analyst

£30 - 35k (DOE): Guru Careers: We are seeking a Pricing Analyst with experienc...

Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Sales Team Leader - Wakefield, West Yorkshire

£21000 - £24000 per annum: Ashdown Group: The Ashdown Group has been engaged b...

Ashdown Group: Head of Client Services - City of London, Old Street

£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

Revealed: Why Mohammed Emwazi chose the 'safe option' of fighting for Isis, rather than following his friends to al-Shabaab in Somalia

Why Mohammed Emwazi chose Isis

His friends were betrayed and killed by al-Shabaab
'The solution can never be to impassively watch on while desperate people drown'
An open letter to David Cameron: Building fortress Europe has had deadly results

Open letter to David Cameron

Building the walls of fortress Europe has had deadly results
Tory candidates' tweets not as 'spontaneous' as they seem - you don't say!

You don't say!

Tory candidates' election tweets not as 'spontaneous' as they appear
Mubi: Netflix for people who want to stop just watching trash

So what is Mubi?

Netflix for people who want to stop just watching trash all the time
The impossible job: how to follow Kevin Spacey?

The hardest job in theatre?

How to follow Kevin Spacey
Armenian genocide: To continue to deny the truth of this mass human cruelty is close to a criminal lie

Armenian genocide and the 'good Turks'

To continue to deny the truth of this mass human cruelty is close to a criminal lie
Lou Reed: The truth about the singer's upbringing beyond the biographers' and memoirists' myths

'Lou needed care, but what he got was ECT'

The truth about the singer's upbringing beyond
Migrant boat disaster: This human tragedy has been brewing for four years and EU states can't say they were not warned

This human tragedy has been brewing for years

EU states can't say they were not warned
Women's sportswear: From tackling a marathon to a jog in the park, the right kit can help

Women's sportswear

From tackling a marathon to a jog in the park, the right kit can help
Hillary Clinton's outfits will be as important as her policies in her presidential bid

Clinton's clothes

Like it or not, her outfits will be as important as her policies
NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders