AO World has acquired a gadget seller that was valued at more than £200million by public market investors. The City is continuing to suffer losses on the ill-fated floats in 2021.
AO World agreed to purchase electronics company musicMagpie from its founders, Steve Oliver and Walter Gleeson in 2007. The market value of the business has fallen since its debut on the market three years ago. Steve Oliver and Walter Gleeson founded the business in 2007 with the aim of selling second-hand books, CDs, and DVDs in the UK and US. They wanted to capitalize on the consumer demand for eco-friendly retailing and recycled products.
musicMagpie stated on Wednesday that the company faces a “challenging economic environment” following its April 2021 market debut, due to rising energy prices and higher interest rates. The company has increased its number of rental subscribers from 4,400 up to 32,700. However, it said that the merger with AO world was to increase its “financial power”.
In the year following the pandemic, the flotation market boomed as more than 100 companies listed. However, the subsequent fall in value of some high-profile names caused damage to the reputation of the City. Bankers and private equity advisors are trying to revive listings in London but they have discovered that institutional investors have higher standards and only want to invest in high-quality assets. Sources in the City have stated that high-profile stock market declines have affected sentiment. These include Dr Martens and Made.com. InTheStyle and Deliveroo are also examples. One banker described this vintage as “scar tissues” for London investors.
AO World’s offer represents a premium 58 percent over musicMagpie’s latest closing share price. Oliver, who owns a stake worth 11.19 percent, will receive a payout of about £1.1million, in addition to the £12.3million he earned from selling shares during the float. Peel Hunt, Shore Capital, and Deloitte all advised musicMagpie on its market debut. They shared a fee pot totaling £11.2million.
John Roberts said that in order to achieve the strategic aim of becoming a destination for electricals it was crucial for AO World’s consumer tech offering. “I’m excited to welcome Steve and his team to the AO family, and to see the potential our combined efforts can unlock.” AO World secured the backing of directors and investors who hold 54 percent of musicMagpie’s issued share capital.
Oliver stated: “AO shares our commitment to provide a first-rate customer service. I am proud of musicMagpie and the brand we created. We provide consumers with an easy, smart and sustainable way to rent, buy and sell refurbished media and consumer electronics. According to Dealogic’s latest data, the UK market saw only eight listings this year, compared with 18 during the first nine-months of 2023.
Samuel Kerr said that after two quarters of strong activity in the global equity capital markets, the third quarter saw a slowdown, with fewer IPOs compared with the same period in 2020 and 2023.
The slowdown in deal flow coincided in August with an increase in volatility on the equity markets and nervousness about this year’s French snap elections as well as the upcoming US election. Global interest rates are now declining, which is a further incentive for equity deals. However, investors and dealmakers alike keep a close watch on the November elections.
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