BSkyB is paying £125m for Amstrad - Sir Alan Sugar's set-top box manufacturing firm.

Sky is offering 150 pence for each Amstrad share, which is 23 per cent more than the shares were fetching on the open market last night. On the London Stock Exchange Amstrad shares have jumped almost 20 per cent to 145p on the news. Amstrad has fallen steadily this year from high of 199p per share in March.

Sir Alan Sugar will not be fired, he will continue to run the business for its new owners. Sugar owns 27.9 per cent of Amstrad and will get £35m if the deal goes through.

Amstrad makes 75 per cent of its revenues from selling Sky its set-top boxes. But currently Sky takes only 30 per cent of its set-top boxes from Amstrad.

The deal means Sky gets inhouse set-top box design, which it hopes will allow it to speed up development of the boxes and therefore the services it can offer its customers. It expects the deal to reduce the cost of procuring its boxes and to add to the bottom line in the first year.

Sir Alan Sugar said: "Sky is a great British success story. I'm proud to have worked so closely with it, and I look forward to continuing to play a part in this exciting business."

The deal needs to be approved by Amstrad's shareholders, but has already been approved by the boards of both Sky and Amstrad.

Sky's press release is here. ®

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