AO World has announced its acquisition of musicMagpie in a cash deal valued at nearly £10 million. This strategic move is set to bolster AO World’s ambitions in the refurbished technology market.
The acquisition values musicMagpie at 9p per share, a substantial premium from its recent closing price. The 2021 flotation of musicMagpie on the stock market saw a market capitalisation of £208 million, but recent financial pressures made this deal a timely intervention.
Strategic Significance
The acquisition is described by AO World as a “significant enabler” in achieving its strategic aim of becoming the premier destination for electricals, particularly refurbished technology products. A critical aspect of AO’s strategy is integrating a high-quality trade-in service, and musicMagpie’s well-established operations present a robust solution to this requirement.
AO’s existing supply channels will be leveraged to enhance musicMagpie’s market reach. This synergy is expected to lower acquisition costs and scale operations with heightened precision. The company’s focus is on unlocking value through its reverse supply chain, which involves streamlining the process of collecting, refurbishing, and reselling used technology.
Background and Market Context
In 2021, musicMagpie floated on the stock market at 193p per share, which translated to a market cap of £208 million. However, subsequent financial challenges have significantly devalued its stock, creating a window of opportunity for acquisition.
Earlier this year, musicMagpie received approaches for acquisition from BT and private equity firm Auerlius Group. Nevertheless, these talks did not culminate in a deal, leaving musicMagpie in a vulnerable position. AO’s acquisition comes as a lifeline, promising stability and future growth.
Financial and Legal Aspects
The transaction structure is a scheme of arrangement, which necessitates court sanction approval. If approved, it will formalise the transfer of ownership and integrate musicMagpie into AO World’s operational framework.
Support for the deal has already been indicated by approximately 54% of musicMagpie’s shareholders, which includes institutional investors and management. This backing significantly enhances the likelihood of the deal’s successful completion.
Management Perspectives
John Roberts, CEO of AO World, has emphasised that the acquisition will enhance AO’s consumer tech offerings. He highlighted the alignment of values between the two companies, particularly regarding customer satisfaction and operational excellence.
Roberts described the acquisition as an exciting venture and expressed enthusiasm about integrating musicMagpie’s services into AO World’s broader business strategy. This integration is expected to foster collaboration and innovation across both organisations.
Statements from musicMagpie
Steve Oliver, CEO and Co-founder of musicMagpie, expressed pride in the business he helped create. He recognised AO as a natural custodian for musicMagpie, sharing similar values and commitment to high-quality service.
Oliver highlighted musicMagpie’s role in providing a sustainable and trusted way for consumers to buy, rent, and sell refurbished technology. He anticipates that joining AO Group will drive the next stage of musicMagpie’s development, leveraging AO’s expansive market presence and operational strengths.
Advisory Roles
Shore Capital has acted as financial advisor to musicMagpie throughout the acquisition process, ensuring the deal aligns with the company’s best interests.
Legal advisory has been provided by a team from Addleshaw Goddard’s Manchester office, led by partner Roger Hart. Their involvement has been crucial in navigating the complex legal landscape of the arrangement.
Looking Forward
The acquisition of musicMagpie by AO World marks a significant milestone in the evolving landscape of the refurbished technology market. It is anticipated that this deal will not only stabilise musicMagpie’s financial standing but also propel both entities towards a more innovative and expansive future.
This acquisition signifies a strategic alignment that promises to enhance AO World’s market position and operational capabilities. By integrating musicMagpie, AO World is poised to lead the refurbished technology market with greater efficiency and customer satisfaction.
The collaboration sets a new standard for both companies, aspiring to deliver sustainable and innovative solutions in consumer technology. The road ahead looks promising, with potential for growth and enhanced value creation.