Frasers Group, established by Mike Ashley, has acquired a £75m share in AO World. This move is part of a series of strategic deals under the new CEO, Michael Murray, who continues the company’s approach of making significant investments in competing firms, a tactic Mr Ashley was renowned for during his tenure.
The group, which owns Sports Direct, Flannels, and Evans Cycles, revealed after the market close on Friday that it had bought an 18.9% stake in the online retailer of domestic appliances.
This purchase equates to 109 million AO shares at a cost of 68p per share. The closing stock price on Friday evening was 69.15p.
According to AO World, the investment represents the successful conclusion of two years of discussions between the two companies.
Michael Murray, Frasers Group’s CEO, expressed his long-standing admiration for AO World and was thrilled about the chance to form a strategic and supportive partnership.
This deal implies that Mr Murray, who succeeded his father-in-law, Mr Ashley, in 2022, is likely to maintain the policy of making significant investments in competitor businesses.
Frasers holds substantial shares in Mulberry, a handbag manufacturer, and Studio Retail Group, as well as a minor stake in Hugo Boss. The conglomerate has also expanded by purchasing financially distressed retailers like Jack Wills and Sofa.com.
Specifics of the partnership with AO World were not disclosed. Frasers Group stated that AO World, which deals in products like toasters, televisions, and refrigerators, will provide valuable perspectives due to its well-defined online-only strategy for electrical appliances.
Michael Murray expressed that through this investment, Frasers will gain from AO’s invaluable expertise in the electrical and two-person delivery sectors, thereby aiding growth in their bulk equipment and homeware divisions. In exchange, AO could potentially benefit from the knowledge and ecosystem of Frasers Group.
John Roberts, the founder and CEO of AO, commented that this development is a significant validation for their business and welcomed news for AO.
This endorsement arrives after a tumultuous period for AO, as the company, listed in London, has seen its share price drop by almost 55% over the past five years due to a challenging expansion into Europe and a dwindling demand amidst the cost-of-living crisis.
The company issued a warning last year that customers were revoking profitable warranties on electronic goods as increased food and energy expenses exerted pressure on household budgets.
