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

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

White goods retailer AO World last month agreed to acquire the used electronics seller in a 9.1 pence per share deal, as part of plans to expand its mobile and customer technology offering.

It believes the acquisition will “mitigate the risk of a shift” in the consumer technology market towards repair and durability as growth of the refurbished technology industry increases.

MusicMagpie was founded in a Stockport garage in 2007 by Steve Oliver and Walter Gleeson as a used CD and DVD seller.

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.

It listed in London three years ago at a valuation of more than £200 million, with plans to use funds from the flotation to reduce debt and expand its smartphone rental division.

However, its value has since fallen to less than £10m due to the end of Covid-related restrictions, fierce competition in the second-hand sector and cost of living pressures dampening sales and profitability.

In the six months ended May, MusicMagpie’s revenue fell 13 percent year-on-year to £53.8 million, while losses were flat at £2.9 million.

“Amid an increasingly competitive environment for second-use technology, and with consumers continuing to feel the pressure on their wallets, the market has undoubtedly been challenging,” said CEO Steve Oliver.

Last year, telecoms giant BT Group and Body Shop owner Aurelius began talks to buy the company before walking away without explanation.

Although the FCA has approved AO World’s purchase of MusicMagpie, approval from the court and a majority of shareholders is still required.

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

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

The Bolton-based group saw significant growth during the early stages of the pandemic, when tough retail trading restrictions prompted many people to buy their fridges, washing machines and electrical appliances online.

Like MusicMagpie, it faced major problems after lockdown measures were eased, but the company bounced back to profit by cutting jobs, closing its German division and introducing delivery charges.

AO World shares were 2.1 percent higher at 106.2p late Wednesday morning.