Sugar serves Betacom an ACE

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The Independent Online
Amstrad will announce today the injection of its loss-making consumer electronics business into Betacom, the separately quoted telephone equipment distributor it controls. The deal is being seen as a possible precursor to a takeover by Alan Sugar of Betacom, allowing the Amstrad chairman to continue his long involvement with the electronics industry after the planned takeover by Psion of the company he founded.

Although the transfer of Amstrad Consumer Electronics (ACE) to a company which is 67 per cent-owned by Amstrad is on the face of it little more than an internal housekeeping affair, it is understood to be crucial to the putative takeover that emerged last week.

Psion has said that its interest in Amstrad lies in Dancall, the group's mobile telephone manufacturing operation, its cash pile and possibly Viglen, a computer manufacturer. There was never any doubt that ACE, which has failed to make a profit for three years, would be disposed of in some way.

News of a quick and easy exit from consumer electronics would reassure investors in Psion who last week pushed the personal organiser maker's shares 25p lower to 350p as they worried about the effect the loss-making businesses would have on the enlarged group.

The takeover, for shares, of a company almost as large as itself, is seen as a high-risk strategy for one of the stock market's most successful companies in recent years. David Potter, Psion's chairman, said last week that he viewed the acquisition of Dancall as a key step in maintaining Psion's position in the fast-converging worlds of computing and telecommunications.

Betacom's shares are expected to rise sharply today as investors reflect on the potential to absorb ACE's revenues at little additional cost. Possibly 100 of ACE's 130 staff would not be taken on by Betacom and the reduction in overheads is expected to push ACE back into the black.

That would boost profits at Betacom, which last year made pounds 430,000. In anticipation of some sort of deal, its shares rose 5p to 14.5p last week, valuing the company at just pounds 9.7m.

Buying Betacom would represent fairly small change for Alan Sugar, who will be left with about 17 per cent of the enlarged Psion after any deal is struck between the two companies. At a proposed takeover price of 200p a share, Mr Sugar's stake in Amstrad is valued at around pounds 80m.

So far speculation over his future has centred on Tottenham Hotspur, the premiership football club he chairs. Analysts believe he harbours ambitions to create a rival, in commercial terms, to Manchester United, valued at more than pounds 250m.