Amstrad break-up keeps Sugar sweet

Company?s founder gets #70 million for shares as holding firm splits, replacing Amstrad name with Viglen Technology

Alan Sugar, chairman and founder of Amstrad, has distanced himself from the vendor after announcing that the holding company will be split into two.

Under the plans for the break up, Amstrad will return #200 million in cash to investors and give them shares in two separate companies. The name Amstrad will disappear from the Stock Exchange while Viglen, the firm?s computer vendor and direct seller arm will seek its own listing as Viglen Technology Plc, to begin trading from 4 August.

Viglen Technology will continue as a direct marketing business and become Amstrad?s holding firm. Amstrad?s sole purpose will be to pursue the litigation of disk drive vendors Seagate Technology and Western Digital, for the alleged supply of faulty drives 10 years ago.

Sugar will receive about #70 million and will retain stakes in Betacom as well as Viglen, comprising a total share holding of 34 per cent, the same proportion he holds in Amstrad. But Sugar said he will reduce that ?as soon as possible?, keeping a stake of more than 10 per cent for the foreseeable future.

Sugar will remain as chairman of the board of the holding company?s trustees and will also remain as chairman of Betacom and become a non-executive director of Viglen, while Michael Beckett, ex-director of Consolidated Gold Fields will take over as non-executive chairman of Viglen. Sugar has not clarified his intentions regarding his interests in Betacom.

Amstrad?s shares jumped 13.5 pence to 277 pence, as plans were revealed to give Amstrad shareholders four types of investment paper in return for their shares in the manufacturer.

According to a statement issued by the company, investors will receive shares in Viglen Technology; a pro-rata share of Amstrad?s 70 per cent stake in Betacom; loan notes worth 163 pence per share, or #200 million in total; plus an entitlement to a share in any net proceeds from the litigation suits.

Although Viglen?s intentions are to float on the open market, some analysts see it as good acquisition material, particularly for those PC vendors battling to enter the small business market though direct sales.

Terry Ernest-Jones, PC analyst at IDC, said: ?There is an all-out assault on the largest direct sellers right now. Although Viglen is very UK-oriented, other vendors could learn from its direct model.?