Frasers Group buys £75m stake in AO World

Mike Ashley’s Frasers Group is taking a £75 million stake in online white goods retailer AO World

  • Frasers Group said it had purchased an 18.9% stake in electronics retailer AO World
  • The strategic investment comes after two years of talks between the companies
  • Mike Ashley’s retail empire is known for buying bad-weather businesses

Frasers Group has entered into a new partnership with AO World following the acquisition of a significant stake in the online retailer of electrical appliances.

Mike Ashley’s retail empire revealed it had invested £75 million last Friday buying AO World shares worth 68 pence, equivalent to 18.9 per cent of the company.

Michael Murray, CEO of Frasers and son-in-law of Ashley, said the deal would enable the company to boost growth in its bulk equipment and home goods business.

Strategic partnership: Frasers Group revealed it had invested £75 million to buy an 18.9 per cent stake in online electrical appliance retailer AO World

Based in Bolton, AO World specializes in selling household products ranging from fridges to washing machines, televisions and thermostats to UK customers.

The investment comes after two years of talks between the companies and is the latest in Frasers’ long history of acquiring interests in other notable brands.

Ashley’s firm is also known for buying bad-weather businesses, many with no records, such as House of Fraser, Jack Wills, home retailer Studio Retail Group, and tailor Gieves & Hawkes.

John Roberts, Founder and CEO of AO, said: ‘We are delighted to welcome Michael and the wider Frasers team to the AO family and look forward to realizing the significant potential we see for this partnership.

“As we continue to build on our strategy to pivot to profitable growth, it will be extremely exciting to explore a range of attractive strategic opportunities together, and we very much look forward to working with Michael and his team .’

Just ahead of the AO World deal, the FTSE 100 company increased its stake in Asos to nearly 10 percent, sparking speculation that it is planning a full takeover of the struggling retailer.

Shopping spree: Frasers Group, founded by Mike Ashley (pictured), has a long history of acquiring stakes in other notable brands

Shopping spree: Frasers Group, founded by Mike Ashley (pictured), has a long history of acquiring stakes in other notable brands

ASOS shares have plummeted more than 93 percent in the past two years amid a slowdown in online clothing purchases due to the easing of Covid-related restrictions and cost-of-living concerns.

Shares of AO World have also fallen sharply since the lockdown era, when Britons tried to upgrade their home appliances with extra savings but couldn’t get them at many brick-and-mortar outlets.

Commerce has been hit by stores reopening, rising costs, supply chain disruption from delivery and semiconductor shortages, and customers canceling repair warranties to save money.

The company subsequently exited its underperforming German market and cut many senior and middle management positions to reduce costs.

These measures appear to be paying off, as AO World reported in April that full-year earnings were expected to be on the high side of forecasts, the fourth increase in earnings guidance since last July.

AO World Stocks were 4.4 percent higher at 72.6 p on Monday morning, while Frasers Group Shares were 1.1 percent higher at £6.92.

Russ Mould, investment director at AJ Bell, said: ‘Frasers is always one to spot a bargain and the big sell-off in AO’s share price – from over 400p in 2021 to below 40p last summer – will not have gone unnoticed.

“It describes the investment as the basis for forming a strategic partnership – while it is easy to speculate that Frasers will eventually acquire AO outright, it is shaped to take equity interests, but not full acquisitions.”