Satellite broadcaster BSkyB – owned by Ruper Murdoch - is to buy TV set-top box maker Amstrad for around £125m. Amstrad was founded by Sir Alan Sugar, the star of BBC's The Apprentice.
Amstrad supplies about a third of all set-top box devices for Sky, and orders from the BBC made up three quarters of Amstrad's sales this year.
Sky believes that the deal means they can save money by designing their products in-house. As a result shares in rival set-top box maker Pace Micro Technology ended 13 per cent lower.
Chairman and CEO Sir Alan, who owns 28% of the firm, will stay with the business.
"I cannot imagine a better home for the Amstrad business and its talented people," he said.
"Our companies share the entrepreneurial spirit of bringing innovation to the largest number of customers. 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."
BSkyB said the deal would "significantly" reduce costs in its supply chain.
"It will help us to drive innovation and efficiency for the benefit of our customers," said BSkyB CEO James Murdoch.
Sugar founded Amstrad - Alan Michael Sugar Trading - as an electrical goods retailer in 1968, and listed on the London Stock Exchange in 1980. It was famous for its range of bargain hi-fi systems, which featured double-cassette decks and garish graphic equalisers.
After success with an electronic word processor, Amstrad launched its own home PC aimed at the mass market in the mid-1980s.
It has also launched and sold the E3 e-m@iler superphone and earlier E-mailer phone.
In 1994, Amstrad purchased Viglen computers, which specialises in supplying computer equipment to public sector, health and educational customers.
Last month new British prime minister Gordon Brown recruited Sugar to advise him on business. Sir Alan will sit on a special "business leaders' council alongside other industry figures.
"I look forward to making my contribution to the business leaders' council, which will act as a consultative body to the Department of Trade and Industry.
"There has always been a difficulty in getting business leaders involved in direct government, due to a requirement for them to relinquish their various business holdings," Sir Alan said.
Sugar donated £200,000 to the Labour Party in 2001.