View from City Road: Sugar offers a bitter deal

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ALAN SUGAR has little respect for outside shareholders in Amstrad, his troubled consumer electronics company. He sold shares in March 1991 at 72p each, making a pounds 34m profit, and now, at the bottom of the economic cycle, he wants to buy them back and take the company private at just 30p a share.

He might like to think he has shareholders over a barrel but they should put up a fight. Relations between the City and dynamic entrepreneurs such as Mr Sugar have never been easy.

Institutional shareholders saw the way Mr Sugar was going long ago and deserted the share register. As a result the overwhelming majority of Amstrad's equity - besides Mr Sugar's 36 per cent - is held by private investors, some of whom have a personal loyalty to Mr Sugar.

With no big institutional shareholding, there is little firepower available to them to turn down the offer. They do not even have non-executive directors to protect their interests, although Kleinwort Benson has been hired as independent adviser.

It is admittedly hard to see how the buy-out can be turned down flatly. That would run the risk of Amstrad being managed by, at best, a de-motivated management under its founder and largest shareholder. The alternative is to negotiate improved terms.

Stockbrokers estimate Amstrad's net asset value at around 45p a share, of which about 20p reflects a pounds 100m-plus cash pile and the balance unsold stocks whose market value is unclear. Even so, 30p represents far too big a discount to net assets. Whatever shareholders' fate, the suspicion remains that Mr Sugar is likely to do well from the deal.