Sky has bought Sir Alan Sugar's company Amstrad for £125 million.

Amstrad, a compression of Alan Michael Sugar Trading, has been involved in the home electronics, computer and games market but now makes 75 per cent of its money selling set top boxes to Sky.

Amstrad's chairman Sir Alan Sugar said: "Amstrad has worked closely with Sky for many years and I cannot imagine a better home for the Amstrad business and its talented people.

"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 values Amstrad at 150 pence a share, leaving Sugar with a £34 million pay off as he owns over a quarter of the company. He will remain as chairman for the time being.

Amstrad started out selling hi-fi equipment before branching out into its own brand computers, using three inch discs, and then into selling MS-DOS PCs. It bought the rights to the Spectrum from Sinclair in 1986 and also bought out an ill-fated games console, a tablet PC to rival Apple's Newton, and the em@iler, a subscription email device.

Sugar will remain as chairman of Amstrad for the moment and oversee the changeover. Amstrad currently supplies around a third of Sky's set top boxes.

"Sky and Amstrad have had a long and positive relationship. The acquisition accelerates supply chain improvement and will help us to drive innovation and efficiency for the benefit of our customers," said Sky's chief executive officer James Murdoch.