City watchdog gives green light to AO World’s acquisition of MusicMagpie

The Financial Conduct Authority has approved AO World’s planned £10m acquisition of MusicMagpie.

Appliance retailer AO World agreed to buy the second-hand electronics seller last month in a 9.1 per share deal under plans to expand its customer and mobile technology offering.

It believes the acquisition will “mitigate the risk of a shift” in the consumer technology market toward repair and sustainability as the growth of the refreshed technology industry expands.

MusicMagpie was founded in a Stockport garage in 2007 by Steve Oliver and Walter Gleeson as a seller of used CDs and DVDs.

The company now sells everything from textbooks to laptops, smartwatches, mobile phones and Xbox consoles, and offers subscription services that allow Britons to rent electronics.

Three years ago, it listed in London at a valuation of more than £200 million, with plans to use the IPO money to reduce debt and expand its smartphone rental division.

However, its value has since plummeted to less than £10 million due to the end of Covid-related restrictions, tough competition in the second-hand sector and cost of living pressures holding back sales and profitability.

In the six months to May, MusicMagpie’s revenue fell 13 per cent year-on-year to £53.8m, while its losses stabilized at £2.9m.

“Amid an increasingly competitive environment for second-use technology, and as consumers continue to feel the strain on their wallets, the market has certainly been challenging,” said CEO Steve Oliver.

Last year, telecoms giant BT Group and Body Shop owner Aurelius entered into talks to buy the company before withdrawing without explanation.

While the FCA approved AO World’s purchase of MusicMagpie, it still requires court and majority shareholder approval.

Once that happens, the acquisition should be completed during the last quarter of 2024 or the first three months of next year.

AO World was founded by John Roberts in 2000 after a friend bet him £1 in a pub that he could start a business.

The Bolton-based group enjoyed significant growth during the early stages of the pandemic, when onerous trading restrictions imposed on stores encouraged many people to buy their refrigerators, washing machines and appliances online.

Like MusicMagpie, it endured great hardship after lockdown restrictions were eased, but the company recovered and made profits by cutting jobs, closing its German division and introducing delivery charges.

AO World shares They rose 2.1 percent to 106.2 pence on Wednesday morning.