by Sugar, Alan
Shortly after the phone call from Robert, I received a call from Mr Morita. First of all, he congratulated me on my fiftieth birthday – he’d read about it in The Times that day – then he asked me whether I’d received his offer. I told him I had, but that it only valued the company at $50m. He started to waffle that his offer was for $150m, but when I cut him short, he asked me to give consideration to his offer rather than reject it outright. I simply told him it wasn’t good enough and that he’d have to get closer to the $150m, with no caveats. I needed to keep Sony in the loop in case we ended up with a Dutch auction around the $50m mark.
Morita told me he’d flown a team of executives over to England, ready to do the deal and sign contracts. I thanked him, but told him this was academic, as he was way off on price. Nevertheless, he said his team would remain in England until such time as we formally rejected or accepted his offer. I told him again that his people should go back to Japan now, as they were miles out and simply wasting my time and his time. Despite that, they stayed.
About an hour later, I received a call from some high-flyer at Bosch, asking me whether their offer was acceptable. I told the guy that there were other people interested in the company and it was now a case of ‘first come, first served’. In other words, all the due diligence was over and that anyone ready to sign a contract in the next two days would get the deal. He called me back ten minutes later and said he was prepared to send a team to my lawyers’ office to hammer out a contract. I asked Robert Leitao to get Margaret from Herbert Smith and Tony Dean, our finance director, ready for this meeting. I would fly in the next day on a chartered plane to oversee the discussions. I wasn’t going to let this thing go wrong.
In the meantime, I was being pestered by one of the Sony chaps, asking me whether we were prepared to go ahead with their offer. Having arranged the meeting with Bosch, I still wanted to keep the balls in the air in case anything went wrong, but I reiterated to Sony that there was no way we would be selling to them.
Sony, in desperation, got their legal advisers to contact Rothschild, saying that I did not have the authority to make the decision – it was a board decision. As I was merely a shareholder, albeit one who owned 36 per cent, I could not make the decision unilaterally. To avoid any legal claims, after calling the other directors and telling them what was going on, Tony Dean drew up a board minute saying that the board of Amstrad was rejecting the Sony offer and we faxed it to the Sony lawyers to shut them up.
In the meantime, the phones were ringing red-hot from Bosch and Sony. As if I wasn’t busy enough, an unexpected visitor turned up at the boat – Sir John Hall, chairman of Newcastle United FC, a very nice man. He was sitting on the aft deck and I asked Daniel to entertain him. I couldn’t spare him any time – I was darting backwards and forwards on the phone, one moment speaking to Sony, the next speaking to Bosch. I apologised to John, saying, ‘One day I’ll tell you what’s going on here, but I can’t at the moment.’ He must have thought I was doing some deal over another Carlos Kickaball player.
I managed to keep the balls in the air between Sony and Bosch and took the plane to London the next morning, arriving at Herbert Smith’s office around 11 a.m. Bosch had sent a whole team of senior people over and Margaret Mountford had drafted up a comprehensive contract. I’d been up the whole of the previous night on the boat, talking about the terms on the phone with Robert Leitao.
When you get down to the last contractual stage of any deal, there are always a few show-stoppers. These are normally knocked out of the way by further debate amongst the parties. As the hours passed, the Bosch contingent kept looking at their watches, obviously conscious that the Easter bank holiday was coming up and they wanted to shoot off. It was getting dangerous again. There were four or five show-stoppers still unresolved and they were starting to say, ‘Well, perhaps we’ll go home and we’ll resume this next week, after the bank holiday.’
I reminded them that when I’d spoken to their boss a couple of days earlier, I’d told him the contract had to be signed today, otherwise all bets would be off and we would start pursuing negotiations with another party from Japan. Bosch had the hots to buy this company – I could see they had been told to do this deal by the powers above – so when I mentioned the other party, they must have panicked a bit.
This was a bit of a bluff and a gamble, but it softened them up and they agreed to my next idea. I could see this mob of jobsworths were desperate to get home for the holidays, so I suggested they leave behind their trusted lawyer and we would print out the signature page of the contract, which everybody would sign now with the exception of their lawyer. He would hold on to this signature page and would not exchange it with us until the four remaining points were resolved to his satisfaction. In this way, they could all piss off home (I didn’t say piss off) and we could carry on working with their lawyer.
They couldn’t sign the piece of paper quick enough.
We now had one man left from Bosch. Tony Dean, Margaret and I slowly wore him down with a kind of three-way pincer movement. The poor sod had been up twenty-four hours, but to be fair, he was a tough nut and he was doing a good job for his firm – he was adamant on some points and would not back down. Tony Dean locked horns with him and one could see there was not going to be a winner.
I stepped in and had a look at the points at issue. I worked out with Margaret which of them was of the least concern to us, then told her I would come back into the room in a few minutes and kind of play-act, asking why we were still arguing over this point. I would big the guy up and concede the point, letting him think I was overriding my people. I’d learned previously that if you box someone too far into a corner, they go into belligerent mode. In the end, the guy accepted and the deal was done. I had sold Dancall for $150m. The announcement of the sale was to be embargoed until the first business day after the bank holiday, so although I flew back to the boat, I had to keep the matter secret from my guests.
What an amazing coup! In two years we had laid out £16m for Dancall and now (based on the exchange rate at the time) I’d just sold it for £95m!
At 7 a.m. the following Tuesday, 1 April 1997, the deal was announced. Mr Morita of Sony called me to say I had done a magnificent deal – and of course he could now see I hadn’t been blagging him when I’d told him he needed to match the $150m. He was surprised I’d been so honest!
After the deal, I hosted a meeting with the Bosch people in Denmark, who unveiled their plans to the Dancall staff. This included the construction of a massive factory in Aalborg which would increase capacity at least fivefold. The staff at Dancall were delighted. I had secured their future. Many of them wished me all the best and thanked me for rescuing the company two years earlier and now securing this wonderful deal for them. They asked me to have some photographs taken with the engineering team to celebrate not only the transaction, but also the breakthrough on the dual-band mobile phone.
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After the sale of Dancall and the failed acquisition of Amstrad by Psion, I started considering ways of reorganising the company. There were no blockbuster products on the horizon to replicate the successes of the mid-eighties, plus I was preoccupied with fire-fighting at Tottenham. I guess I’d stupidly lost interest in Amstrad and in the back of my mind, I wanted a graceful way out. Employing Rogers had failed, even though I’d genuinely attempted to cooperate, in the hope that perhaps someone could run the company professionally and properly. On reflection, it goes to show I really am what I am – a bit of a one-trick pony. I’m as good as the product or venture I’m involved with at the time.
Realistically, I must be a bit of a control freak. I was intimately involved with every single item Amstrad sold over the years. I knew where every single nut and bolt was within my company. I often admire others who run giant organisations – the likes of the great Arnold Weinstock and indeed Rupert Murdoch – who have managed to master the art of delegation, allowing other people to run sections of their business. Clearly the
Alan Sugar way had its limitations, but in its defence, we must have broken all-time records in reaching the dizzy heights we did in the mid-eighties. Nevertheless, I was effectively a one-man band, albeit with a lot of good workers around me.
I can’t recall any of our successful product ideas coming from anyone other than me. Having said that, I do not underestimate the importance of people like Bob Watkins, Bill Poel, Roland Perry and a host of others. In those early days, they did a lot of explaining to me about what things were and how they worked.
I still quite liked the idea of selling off Amstrad and perhaps restarting again in a small way, with a slimmed-down organisation.
Having sold Dancall, Amstrad had amassed a cash pile of nearly £200m. The organisation now comprised the main consumer electronics division, the computer company Viglen and our 66 per cent shareholding in Betacom. I consulted Margaret Mountford and suggested that perhaps, with this £200m in the kitty doing nothing, rather than spend it irresponsibly on some harebrained idea and possibly lose it, it might be an idea to distribute it to the shareholders, one of whom was me.
Margaret came up with an idea called a scheme of arrangement. This would result in the shareholders receiving a share in every asset we owned, by way of a reorganisation. The shareholders would receive, pro rata according to their percentage holding in Amstrad, their share of the £200m in cash and a portion of Betacom. We would also seek a separate listing on the Stock Exchange for Viglen and the shareholders would also get pro rata shares in that. We would also issue letters of entitlement for the ongoing litigations against Seagate and Western Digital so that if a windfall from these court cases should accrue post-reorganisation, shareholders would be entitled to a pro rata share of that as well.
The scheme was very complex, but also very clever. It got me what I wanted. When the company was split up, I would receive a considerable amount of cash plus a shareholding in Betacom. It was my intention to rename Betacom ‘Amstrad PLC and effectively make it the consumer electronics division. Once the whole transaction had gone through, Betacom (now Amstrad PLC) would be my new vehicle going forward.
Mike Ray, one of Amstrad’s accountants, was appointed finance director to the board of Viglen, which became a separate public company in its own right. Based on the pro rata scheme, I held a 36 per cent shareholding in it. From my point of view, I was quite happy to allow Bordan Tkachuk and Mike Ray to run Viglen. It was a specialised business supplying schools, education authorities and corporations, which was not the consumer-oriented market I had grown up in.
I pressed the button on this scheme in August 1997. It received no objections whatsoever from the shareholders, as it was a very fair way of divvying up the giant Amstrad organisation. It would be entirely up to the existing shareholders to do as they wished with the various elements that came from it.
It kind of gave me a little injection of enthusiasm, to have a much smaller but publicly listed company again, the newly named Amstrad PLC. There was a start-from-scratch feel about it and all the baggage of the larger Amstrad was now behind me. Internally, going forward, we would call the company New Amstrad. I moved the whole of Betacom’s activities from its Ponders End premises to Brentwood.
Norman Becker, the managing director, was not at all happy at having to work at Brentwood, especially under my control. I had also come to realise that he wasn’t the brightest star in the sky. He was one of those old hacks from the industry that everybody liked, but who had few ideas. We agreed severance terms and he left. My son Simon became sales director of New Amstrad and we created a new share option scheme. Betacom’s new financial director, Martin Bland, moved across to Amstrad and he turned out to be a bit of a gem, a really serious and good professional.
I decided that in addition to traditional consumer electronics products, we would continue to pursue the telecoms market, where Betacom’s core business lay. Up until then, Amstrad had not been involved in fixed-line telephones. It went against my philosophy because these items would sell for only £15–20 retail. However, although the net margin was small, it was a high-volume business.
Bob Watkins had kept in contact, even though he was at Binatone, and once again he told me there wasn’t much going on in Hong Kong – Gulu didn’t want to invest in the development and production of mobile phones. I offered Bob another opportunity to come back on the basis that he’d give up any idea of being a business guru and stick to what he was best at – getting stuff made at the right price. I said it was a chance for us to start over again, as New Amstrad. He didn’t need much convincing and he swiftly resigned. Even though I’d brought him back to deal with engineering and costs, he was awarded the title of managing director of New Amstrad.
We had a small team of around sixty employees left, including Vitus Luk, Isaac Ip, Ian Saward, Cliff Lawson, Ivor Spital, John Beattie and quite a few others who had been with Old Amstrad for many years. Now, like me, they felt a buzz of enthusiasm at our remit to try to replicate what we’d achieved in the past. It was a new birth.
Old Amstrad owned only 66 per cent of Betacom. When I got my portion of shares after the pro rata scheme, I ended up with 22.9 per cent of Betacom. I was confident I could take the company forward and was interested in increasing my shareholding. While the market accepted the break-up arrangement, they weren’t exactly champing at the bit to invest in New Amstrad and the share price was languishing at low levels. I wanted to take the opportunity of picking up another 7 per cent to bring me up to the maximum shareholding I could have (29.9 per cent) before I had to make a full offer to all the other shareholders. My brokers informed me they’d identified a shareholder who owned 7 per cent of the company and who’d expressed an interest to sell. However, under some confidentiality agreement, they were unable to disclose to me the seller’s name. This sounded rather stupid because it was possible simply to look at the list of shareholders and see which of them owned 7 per cent of the company.
And who was this mystery seller? None other than Gulu Lalvani! He had bought 7 per cent of the shares in Betacom shortly after Amstrad had acquired the company a few years earlier. I’m sure in your eyes this guy must now be starting to sound a bit obsessed. As you know, he had closely tracked me all the way through my career, though at the time I hadn’t really taken much notice of the attention he was paying me.
Knowing Gulu, I could understand the secrecy he had imposed on the brokers because he would think that once I knew it was him, I’d get on the phone to him directly and start bargaining. He was totally wrong. I knew exactly how to deal with him: boost his ego by playing along with his little game; let him think he was pulling the wool over my eyes. I offered a price discounted to the market – something one typically does when buying such a big chunk of shares – and acquired Gulu’s shares, bringing my own shareholding up to 29.9 per cent.
Old Amstrad was no more. It was now a shell company, left with just a fighting fund to pay the costs of the litigations against Seagate and Western Digital, as well as some other claims we had from the Spanish market. The Old Amstrad shell did need to remain in existence in case we received some windfalls from the pending Seagate or Western Digital actions.
It turned out we were right to issue the letters of entitlement and leave the old shell running. The judge in the Seagate case, having taken over a year to deliberate, awarded Amstrad the equivalent of $150m!
You’ll recall my references to Tony Grabiner and how I’d considered him to be a bit unlucky for Amstrad, despite being an excellent barrister. Well, in a similar way, this fellow Peter Goldsmith, who’d been against me twice (for Seagate and the FA) was clearly my lucky barrister – he’d failed against me on two occasions.
The $150 million was made up of a refund for every single hard disk drive we’d ever purchased from Seagate, plus damages, plus the interest which had accrued over the past nine years. Seagate immediately announced they were going to appeal. The CEO of Seagate USA made a public statement saying this was a typical ‘home win�
� – a tainted judicial system – and made some rude remark about the judge.
Under UK law, when a judgement is made, the money has to be paid. But as Seagate were going to appeal, the money would be kept in a lawyer’s escrow account and could not be released to us. This was a pain in the arse. After all this hard work, we were going to have to face another three or four years of arguing in court to see whether the judgement would be upheld. We’d won, but we hadn’t got the money.
Throughout the course of the Seagate action, it was clear, in evidence shown to the court, that Seagate knew they were shipping us crap. As an example, one of their internal memos came to our attention through the discovery process, which required that all Seagate documents referring to Amstrad had to be disclosed, and vice versa. Seagate’s internal memo clearly showed that the stock they were about to ship us had already been rejected by another customer.
Under American law, there are actions which can be brought to claim for punitive damages if you can prove the company in question had damaged you intentionally and not accidentally. It occurred to me that while we’d brought the action against Seagate in the UK, one way of encouraging them to release the money was to start making noises about bringing an action against them for punitive damages in the United States. This was a bit of a long shot, as punitive damages had never been awarded to a company. Typically, they would be paid out to members of the public who had suffered illness or injury – for instance, if a pharmaceutical giant sold duff drugs or a car manufacturer knowingly shipped faulty vehicles. These companies would get punished, sometimes by having to pay sums that are ten or twenty times more than the actual damage caused.