AO World swoops to acquire musicMagpie for £10m
AO World is to take over musicMagpie in a cash deal for the Stockport-based online retailer.
The deal values musicMagpie at approximately £9,982,105, but at 9p a share is a sufficient premium on the closing price of 5.75 pence per musicMagpie shares as of 1 October 2024.
In 2021 musicMagpie floated on the stock market at 193p per share with a market cap of £208 million.
However, this year the business, which specialises in refurbishing consumer technology, disc media and books in both the UK and US, has been under offer since approaches from BT and private equity investor Auerlius Group, but though those two suitors issued statements to say they were no longer in talks.
The deal is being proposed as a “scheme of arrangement” and will be subject to a court sanction approval.
Almost 54% of shareholders, including institutions, management and NVM have indicated they will back the sale.
AO World chief executive John Roberts described the deal as “a significant enabler” of AO’s ambitions to offer refurbished technology products, which it has offered through their ownership of Mobile Phone Direct.
Roberts commented: “To achieve our strategic ambition of becoming the destination for electricals, it is crucial for AO to enhance its consumer tech offering. A top-tier trade-in service will be essential, and musicMagpie represents a significant enabler in unlocking value through our reverse supply chain. Moreover, musicMagpie stands to leverage our existing supply channels, which could lower its cost of acquisition and allow us to scale refurbished technology with operational precision. musicMagpie’s commitment to customer satisfaction and its exceptional brand are closely aligned with our values, and our shared cultures create a strong foundation for collaboration.
“I am excited to welcome Steve and the musicMagpie team into the AO family and to realise the potential that our combined efforts can unlock,” he said.
musicMagpie CEO Steve Oliver
Chief Executive Officer and Co-founder of musicMagpie, Steve Oliver commented: “AO is a highly trusted consumer brand that shares our commitment to providing a first-rate service for customers.
“I am very proud of the musicMagpie business and the trusted brand that we have created, providing consumers with a smart, sustainable and trusted way to buy, rent and sell refurbished consumer technology and physical media products.
“We welcome the opportunity to join the AO Group and believe it represents a natural custodian for musicMagpie as part of the next stage of the business’ development.”
Shore Capital have been financial advisors to musicMagpie plc alongside a legal team from the Manchester office of Addleshaw Goddard, led by partner Roger Hart and includes Lucie Walker, Jonathan Fletcher-Rogers, Sylwia Kurkusiewicz and Melissa Chaplow.
Russ Mould, investment director at Manchester investment platform, AJ Bell, said: “AO is buying musicMagpie for a fraction of the price at which it joined the stock market three years ago.
“It’s somewhat ironic that a seller of CDs for pennies on eBay is being bought for a song.
“musicMagpie has been a disaster on the stock market, failing to make money as a business and creating losses for investors as the share price drifted downwards.
“Alongside shifting old CDs and DVDs, the business bought used phones and laptops, did them up and rented them out. Quite a few customers defaulted on payments and the business had a weak balance sheet.”
He added: “AO’s purchase price might be cheap relative to the IPO, but this will not be an easy bolt-on acquisition.
“Strategically, the two companies fit together nicely – they are both into electronics recycling and AO will now have greater scale.
“However, musicMagpie is not in a good shape and AO is taking on a big risk just at the point when its core business has finally stabilised after a difficult period.”
