- Musicmagpie shares gain 49% in morning trading
- Offer at 58% premium to closing share price on 1 October
- Musicmagpie shareholders will receive 9.07p per share in cash
Shares in Musicmagpie (MMAG:AIM) gained 49% to 8p in morning trading after the refurbished electronics seller received a £10 million takeover offer from electrical retailer AO World (AO.).
Musicmagpie shareholders will receive 9.07p per share in cash – a 58% premium to the closing price of 5.75p per share on 1 October.
AO said its proposed acquisition of Musicmagpie will ‘enhance its consumer tech offering.’
Musicmagpie was founded in 2007 and sells refurbished consumer technology including mobile phones, laptops, and consoles.
The Stockport-headquartered company floated on London’s junior market in April 2021 at £208 million – a fraction of its current value.
The IPO (initial public offering) saw shareholders net £95 million and the company £15 million.
SHAREHOLDER RELIEF
Non-executive chair of Musicmagpie, Martin Hellawell commented: ‘The Musicmagpie board is pleased to recommend AO's cash offer for Musicmagpie. AO’s offer is the result of Musicmagpie's extensive process to seek an acquiror for the business and represents an opportunity for shareholders to realise their holdings in full and in cash at a significant premium to the prevailing share price.’
AO World’s takeover has come at the right time for Musicmagpie’s long suffering shareholders, who have seen shares fall 60% this year.
In June, Musicmagpie shares hit a new low as the company reported lower interims and issued a profit warning.
Revenue dropped to £53.8 million in the first half of 2024 compared to £61.9 million last year due to a change in the US business.
Russ Mould, investment director at AJ Bell comments on the deal: ‘Musicmagpie has been a disaster on the stock market, failing to make money as a business and creating losses for investors as the share price drifted downwards.
‘Alongside shifting old CDs and DVDs, the business bought used phones and laptops, did them up and rented them out. Quite a few customers defaulted on payments and the business had a weak balance sheet.
‘AO’s purchase price might be cheap relative to the IPO, but this will not be an easy bolt-on acquisition.
‘Strategically, the two companies fit together nicely – they are both into electronics recycling and AO will now have greater scale. However, Musicmagpie is not in a good shape and AO is taking on a big risk just at the point when its core business has finally stabilised after a difficult period.’
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DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Sabuhi Gard) and the editor (Martin Gamble) own shares in AJ Bell.
