Mike Ashley’s Frasers Group has taken an 18.9% stake in the online electricals retailer AO World in a £75m deal involving buying out shares held by the crisis-hit Odey Asset Management.
Frasers Group, the parent of brands from Sports Direct to Evans Cycles, said the deal was part of a strategic partnership that the two companies had been in talks about forming for two years.
The Bolton-based AO World, founded in 2000 as Appliances Only by John Roberts, is the biggest seller of large domestic appliances in the UK.
“Frasers has long admired what John and the AO team have built, and we are delighted to have the opportunity to form a supportive, strategic partnership,” said Michael Murray, the chief executive of Frasers Group.
“Through this investment, Frasers will benefit from AO’s valuable knowhow in electricals and two-man delivery, helping us to drive growth in our bulk equipment and homeware ranges.”
Frasers Group has acquired most of the shares from Odey Asset Management, as the business reels from the departure of its founder Crispin Odey after allegations of sexual misconduct, which he denies.
Investors welcomed the deal, sending shares in AO World up more than 9% on Monday, which makes Frasers the second-largest shareholder in the business.
The largest shareholder is Camelot Capital Partners, with a 20.4% stake, with Roberts now the third largest shareholder, at 18.3%, according to data from Refinitiv. Following the deal, Odey Asset Management retains a 5.2% stake in AO World.
“It’s no surprise that Frasers Group has set its sights on AO World, which has recently benefited from a series of cost-cutting measures which have collectively made the business more efficient,” said Sarah Riding, retail partner at law firm Gowling WLG. “Given the increased competitive nature in retail at present and the need to think more laterally about how to meet consumer needs, the logistical strength that the Frasers Group stake will lend to AO’s future should help it remain in pole position.”
The deal comes a week after Frasers Group increased its stake in Asos to 9%, making it the third-largest shareholder, before a potential battle for control of the ailing online fashion business
AO World, which has faced tough conditions as the cost of living crisis restrains household spending, said the investment was a vote of confidence in the business.
“This is great news for AO and a fantastic endorsement for our business,” said Roberts, the chief executive. “[We]look forward to realising the significant potential that we see for this partnership. As we continue to build on our strategy of pivoting to profitable growth, it will be hugely exciting to have a range of compelling strategic opportunities to explore together.”
