Ashley’s Frasers Group snaps up 19% stake in electricals retailer AO World

Mike Ashley’s Frasers Group has swooped in a £75m share deal to take a 19% of Bolton-based online electricals retailer, AO World.

It is understood that Frasers bought the shares from London-based hedge fund Odey Asset Management which is currently the centre of misconduct allegations surrounding its founder, Crispin Odey.

The partnership announced on Saturday (June 10) that Mr Odey was leaving the business, adding he will “no longer have any economic or personal involvement in the partnership”.

The statement said: “We, the executive committee of Odey Asset Management LLP, are announcing that Mr Crispin Odey is leaving the partnership.

“As from today, he will no longer have any economic or personal involvement in the partnership.

“Odey Asset Management Group Ltd will also cease to be a member and the partnership will now be owned and controlled by the remaining partners and managed as an independent legal entity.

“The firm has been investigating allegations concerning Mr Odey, but cannot comment in detail as it is bound by legal obligations of confidentiality.”

The hedge fund offloaded its stake in AO on Friday.

Odey was said to have been a supportive investor in AO since its stock market debut in 2014, and had increased the fund’s holding as part of a capital-raise last year.

Mr Ashley is keen to build a stake in AO and his son-in-law, Michael Murray, who now runs Frasers Group, said in a statement: “Frasers has long admired what John and the AO team have built, and we are delighted to have the opportunity to form a supportive, strategic partnership.

“AO is a fantastic business with a clear strategy which is leading the market in online-only electricals.

“Through this investment, Frasers will benefit from AO’s valuable know-how in electricals and two-man delivery, helping us to drive growth in our bulk equipment and homeware ranges. In turn, AO will have the opportunity to benefit from Frasers’ expertise and ecosystem.”

John Roberts, founder and CEO of AO, said: “This is great news for AO and a fantastic endorsement for our business.

“We are delighted to welcome Michael and the wider Frasers team into the AO family and look forward to realising the significant potential that we see for this partnership.

“As we continue to build on our strategy of pivoting to profitable growth, it will be hugely exciting to have a range of compelling strategic opportunities to explore together and we’re very much looking forward to working with Michael and his team.”

Russ Mould, investment director at Manchester investment platform AJ Bell, said: “Frasers’ purchase of a 18.9% stake in AO initially seems an odd move but there is some logic to it.

“The company has traditionally focused on fashion-related investments as a way of expanding its empire of predominantly sports and athleisure brands.

“In recent years it has aspired to get more money from its customer base and a natural extension has been to focus on things that make people look and feel good beyond simply the clothes on their back. That explains its push into beauty, handbags and sofas through such brands as Flannels, House of Fraser and Sof (.com).

“If it has dressed people and partially furnished their homes, it makes sense to think about other ways to get these customers to part with more cash.

“It has become fashionable to have sports equipment at home, whether that be exercise bikes, weights or rowing machines. These are incredibly bulky to get to people’s homes, so there is merit in finding ways to make the delivery process more efficient for such items as well as existing homeware products it is selling – which is where AO’s expertise might come in handy.”

He added: “Frasers is always one to spot a bargain and the big sell-off in AO’s share price – from above 400p in 2021 to sub-40p last summer – will not have gone unnoticed. It describes the investment as the foundation for forming a strategic partnership – while it is easy to speculate that Frasers will eventually acquire AO outright, it has form for taking equity stakes but not making full takeovers.

“There is one odd thing about the deal, however. Logistics services are a commodity – it doesn’t need to spend £75m on buying nearly a fifth of a business when it could talk to any number of delivery companies for help. Talk that Tuffnells is about to go into administration might even present an opportunity if it wanted to own a logistics firm.”