AO has announced a recommended cash offer for consumer technology re-commerce leader musicMagpie. We believe this is an exciting opportunity for AO, given musicMagpie’s expertise and trusted brand in consumer technology re-commerce, with over 9m customer contacts. AO is offering 9.07p per share, equating to £10m cash and a c. £24m Enterprise Value which, in our view, represents good value at c. 0.2x EV/LTM Revenues and 3.4x EV/LTM EBITDA. Whilst we do not, at this early stage, forecast the consolidated profit impact of musicMagpie, we expect the acquisition to be value-accretive in the medium term.
AO is retaining musicMagpie’s senior management team, including its CEO and co-founder Steve Oliver and will work with the team to leverage synergies across the combined group. This will include benefits from a larger combined customer base and from enabling musicMagpie to leverage AO’s trade-in volumes of mobile phones and other electronics. AO will undertake a 6-month evaluation process post-acquisition, and we anticipate the acquisition will be value-accretive in the medium term.
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