Authors: Alan Sugar
Tags: #Business & Economics, #Economic History
'What do you mean by that, Alan?'
'Look, Sam, they won't expect a
increase in your bid - they'll be thinking you'll go up in one million pound increments - so make your final bid PS60m per season and blow them out of the water.'
I'm not exactly sure what happened after that - how Sam contacted Parry to get his message through or indeed the actual figure he offered, but the meeting of the Premier League chairmen had started and the TV deal was about to come up.
At this point, I interjected, through the secretary, stating that I wanted to declare a conflict of interests. I explained that Amstrad manufactured satellite dishes and that I was a big supplier of BSkyB, who were one of the bidders for the TV rights. I suggested that due to this fact, Tottenham Hotspur Football Club should abstain from the vote, to avoid any accusations that I was acting in my own interest.
Most of the other clubs, including Chelsea, Leeds, Wimbledon, Manchester City and Nottingham Forest, objected to this suggestion, saying that Tottenham not being able to vote might alter the decision. A motion was put forward balloting all the clubs as to whether Tottenham should vote, in view of my declared conflict of interests.
After a lot of protestations from Arsenal's David Dein and Manchester United's Martin Edwards, the meeting agreed that Tottenham should indeed be allowed to vote. David Dein was dead against BSkyB and was singing songs of praise about ITV. He was throwing all kinds of curve-balls into the discussion, like suggesting the Murdoch empire might not have the money.
Fortunately, I was there and was able to counter all this rubbish. To be honest, my back was up. I was disappointed by all the sniping going on when discussing whether Spurs should be allowed to vote or not and I could see agendas forming. The big clubs were trying to bully the rest - it was undemocratic. It seemed clear that they wanted to line their own pockets by favouring ITV. I was annoyed, so I went in to bat big time for BSkyB.
After a couple of hours' discussion, the motion was put to the room as to whether we should accept BSkyB's or ITV's offer. BSkyB got the deal.
Ironically, they won it by one vote - clearly Spurs being allowed to vote
important. The ITV people were furious.
The next day, I went off to France for a few days' holiday. My son Daniel called me to tell me the newspapers were full of stories about me telling Chisholm to 'blow them out of the water'. The stories went on to say that ITV were going to take BSkyB to court and get an injunction to stop this deal going through. Daniel told me that, in football terms, I had started World War Three. There were pages and pages on the whole thing in every national newspaper and it was suggested that it was all down to me.
The thing about football people is that they don't like change. They tend to get stuck in their ways and this move to BSkyB, a satellite company who were going to charge a subscription, was alien to most of the football fraternity, as well as some of the old sports hacks in the media. They were happy with the way football had been broadcast in the past and were worried that the face of football would change now that Murdoch had got his hands on it. It was quite negative stuff and the non-Murdoch media was giving me a load of stick, suggesting that, as I was a supplier to BSkyB, I was lining my own pockets. However, I had openly declared my conflict of interests, so there was no foundation to this.
A few days later, in the High Court, ITV were again blown out of the water by BSkyB's lawyers, who argued that the tender for the television rights was conducted in a correct and legal manner. It was a great victory for Sam Chisholm who, coincidently, was at my offices in Brentwood at the time his lawyers called with the news that ITV had lost again. Sam asked if he could call Rupert and give him the good news.
Was I pleased that BSkyB won the deal? Absolutely. Yes, it was going to be good for the satellite business, and yes, it was going to be good for Amstrad, but I had acted in good faith and declared my conflict of interests. In any case, it was also a good business proposition for the clubs because BSkyB stumped up a fortune compared to the peanuts previously paid. It was good for Spurs too, as we'd get a healthy share of the money.
A Backseat at Amstrad and Shooting Bambi's Mum
The affairs of Tottenham Hotspur were not distracting me too much from the core business of Amstrad - at least, not yet. Bob Watkins and I were discussing other markets for Amstrad, including telephones, which is where my friend Dennis Baylin came in (you may recall Dennis, who thought he'd broken his ankle in Florida). Dennis ran a small public company by the name of Betacom, which specialised in selling telephones. He'd sold Betacom to a venture capitalist, but decided to stay on and, together with the capitalist, float it as a public company - I guess this was with a view to retaining some of the shares and hopefully making another windfall. This public company didn't do very well at all and Dennis did a bit of a Ken Ashcroft. Having made enough money, he figured he'd hang on and work out his contract with the company, then leave.
It was after another Christmas visit to Florida that he called me to say he'd been sacked by his board on his arrival back to the UK. In truth, I don't think he was too bothered, as he wanted out; what
more hurtful was that some of his so-called colleagues had ganged up against him.
Betacom was going down the drain and Bob and I saw our opportunity. In May 1992 Amstrad PLC made a most unprecedented move in acquiring 66 per cent of the shares of Betacom, also a public company.
No one could understand why I didn't buy the whole company outright, but in the back of my mind I had the vision of one day, having squeezed Amstrad down through rationalisation and possibly having found a buyer for it, being able to retain this other small public company on its own and effectively start again. Let's face it, leading a public company had been very good for me. I was able to cash in on large chunks of shares as Amstrad's share price rose. I made far more money than I could ever have done if the company had remained private, as the only way of getting money out of a private company
was by dividends from profits. In the crazy Amstrad days, our stock market rating valued our shares far beyond the equivalent of any dividends I could have taken. So I would never complain about being involved in public company life. How could I?
I had this in mind because it was clear that Amstrad was still struggling. We'd lost the PC market due to the failed PC2000 series, the buzz of blockbuster products had gone and I'd spent so much of my time fire-fighting that I was out of ideas. The share price had plummeted from the dizzy heights of PS2.35 and was now hovering at around 26p. The new share options I'd given the staff were worthless, as they were issued at a higher price - 48p.
Marion's frustration with the retailers as well as the demise of her share options resulted in her resigning in February 1992. I too was frustrated by the situation. I guess the market was losing confidence in us, seeing us shrinking our subsidiaries, shutting things down in Hong Kong, selling off computers at low cost and with profits dropping year on year. Then, in June 1992, we reported a huge loss of nearly PS71m - we had taken a realistic view on the value of the massive PC2000 series inventory and had written it down.
Confidence from the market had now totally drained away. From my perspective, this was outrageous. I could see why the market was nervous, but I didn't understand why the share price had dropped to as low as around 22-23p, meaning that the market value of the company was below its asset values - lower than the cash balance in the company! I commented on this several times in the media, explaining that this was crazy. No matter how bad business had been in the last year or so, we still had good assets and potential in the marketplace.
After my summer holiday, I decided to see if it would be possible to privatise the company, so that it would be 100 per cent under my control again.
believed in Amstrad, even if no one else did. I'd amassed a lot of cash from previous share sales and the company had cash in itself. Margaret Mountford from Herbert Smith explained the mechanics of how to make an offer and we also discussed it with Tim Holland-Bosworth from Kleinwort Benson. I'd calculated that as the share price was hovering around the 23p mark, then from a logical point of view, if I offered 30p per share, people would bite my hand off.
Margaret also explained that although the company I was trying to privatise had lots of cash in it, it would be illegal under stock market rules for me to try to acquire Amstrad using its own cash. Instead, I needed to find a bank to lend me the money for a few weeks while the transaction was going through, then pay them back quickly once the deal was done. Lloyds Bank was cautious about giving a guarantee for over PS140m, even though they
could see the cash was in the company. I was a bit frustrated about this charade - in order to do the deal, I had to put up personal assets as security, such as cash and real estate I'd acquired.
Tim Holland-Bosworth was not particularly happy with the 30p price. Traditionally, your merchant banker would recommend what they felt was a good offer' to shareholders. I argued with him on the basis of simple logic, saying, 'Right now the share price is twenty-two pence and it's been like that for the last six months. Why would anybody in their right mind turn down thirty pence? Why should I offer any more?'
He explained that my offer of 30p was below the total asset value of the company, to which I replied, 'Exactly, that's why I'm so annoyed! If the share price was fifty or sixty pence now, I'd be quite happy and get on with my work. But I'm pissing in the wind at the moment - no matter what we try to do, it is not reflected in the sentiment of the market.' Reluctantly, he agreed to the 30p price and an offer was sent out to shareholders in September 1992.
Margaret Mountford warned me to keep schtum during the privatisation transactions. She added, 'There will be a lot of shareholders - particularly institutional ones who paid a lot of money for these shares in Amstrad's heyday - who won't be happy bunnies to find that
the one buying them back.'
Did I take any notice of Margaret? No.
As soon as the privatisation announcement was made, Nick Hewer was pestering me every minute of the day. Every national newspaper in the country suddenly woke up to Amstrad again, having been quiet for the past eighteen months while we struggled. Like a bloody idiot, I fell for it hook, line and sinker and I got sucked into discussing my reasoning behind privatising the company. Of course, the real reason was that I wanted to get it back on the cheap and effectively pay for it with the cash that was sitting inside it, but I didn't feel I was doing anything wrong. After all, if the shareholders felt the company was worth more, why wasn't the share price 50-60p?
Pages and pages of articles were written, slagging me off. Outraged shareholders were commenting to the press. It was a great story for the financial newspapers and the adverse publicity created a groundswell of anti-Sugar feeling. One chap, Gideon Fiegel, who owned a few shares as a private individual, decided to go on a one-man crusade and was championed by the newspapers as 'this poor fellow being done down by the multi-millionaire'. As you can imagine, he became a star overnight. They practically had to operate on him to prise the microphone out of his hands. He was like Posh Spice, having his photograph taken at every opportunity.
Margaret's advice was 100 per cent right and I will never know whether the deal would have gone through had I taken it. As it was, the shareholders voted it down and my attempt to privatise the company failed. Gideon Fiegel was hailed a hero. I guess he'll dine out on that story till his dying day.
When the dust settled on the failed privatisation, there were complaints from heavy-hitting institutions with large shareholdings that I was too much of an autocrat, that Amstrad was not being run in accordance with public company standards. There were no non-executive directors; I had the role of chairman
chief executive officer. They were demanding that I restructure the company in a different way.
It was not a nice feeling, having the investors turn on me while the media was damning me as someone who'd reached his peak and was on the way down. I think it was one of the lowest times in my life. Most people in my position would have taken the view, 'Well, I've made loads of money and I'm a multi-millionaire. These days I'm just left running a load of aggravation, and to top it all I'm getting a load of stick from the outside. Why bother?' The easiest thing to do would have been to hand over the keys to someone else and I even recall Ann saying something to me along those lines. But I had built this baby from scratch and I just couldn't bring myself to walk away.
I don't know what came over me at the time, but I heeded the City's call to adopt public company structures. Uncharacteristically, I agreed to toe the line and pad out the board in the proper public company way, to keep all the shareholders happy. In March 1993 we appointed two non-executive directors: Jeoff Samson, who had lots of experience as a director at GEC, and Michael Beckett, who was similarly experienced in public company life. They were tasked to find a chief executive to run the company while I remained in the position of chairman.
I wasn't the only one hit hard by these events. Bob Watkins was starting to feel a little despondent about the direction in which Amstrad was moving - in fact, he wanted out. He'd noticed a similar air of despondency in me since I'd failed in my attempt at privatisation.