Frasers Group’s £75 million deal for AO World stake sends shares higher

Frasers, the parent firm of Sports Direct, House of Fraser and other brands, has snapped up an 18.9% stake in AO.

Online electricals retailer AO World has revealed it is to close its German business after eight years and focus on its UK operations (Alamy/PA)

Shares in AO World and Frasers Group have lifted higher after Mike Ashley’s retail empire bought a £75 million stake in the online white goods retailer.

Frasers, the parent firm of Sports Direct, House of Fraser and other brands, has snapped up an 18.9% stake in AO.

The deal, announced after markets closed on Friday, saw the retail giant buy 109.4 million AO shares at 68p.

The stake acquisition includes shares in the technology retailer previously owned by crisis-hit hedge fund Odey Asset Management, it is understood.

The fund sold off its stake to raise money amid the fallout from misconduct allegations against its founder Crispin Odey, who left the fund over the weekend.

Mr Odey denies the allegations.

Frasers, which is majority-owned by Mr Ashley, has a history of investment partnerships in other retail brands, such as Asos and Hugo Boss.

It said the deal comes after two years of talks with AO regarding a potential deal.

Michael Murray, chief executive of Frasers, said: “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.

“AO is a fantastic business with a clear strategy which is leading the market in online-only electricals.”

John Roberts, founder and chief executive of AO, said: “This is great news for AO and a fantastic endorsement for our business.

“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 and we’re very much looking forward to working with Michael and his team.”

Andrew Wade, equity analyst at Jefferies, said: “Frasers’ interest in AO is clearly more than opportunistic and with AO’s pivot-to-profit strategy putting the business in a much stronger position, we are inclined to see this development as a catalyst for collaboration between the two businesses – as well as further recognition that AO’s shares offer upside potential.”

Shares in AO jumped 7.5% higher as a result on Monday morning, while Frasers shares improved by 1%.