European online electrical retailer AO World has conditionally agreed to purchase UK-based online mobile phones retailer Mobile Phones Direct for an enterprise value of £32.5m ($42.28) on a cash-free, debt-free basis.
Based in Thatcham, England, Mobile Phones Direct currently operates its own branded platform, along with Smart Phone Company branded platform.
The transaction is expected to increase the scale of AO World’s mobile offering, as well as enables the company to deliver a range of products and services from both entities.
In addition, the deal allows AO World to develop existing categories and services as well as add new complementary categories to its portfolio.
AO World CEO Steve Caunce said: “This deal represents a significant step forward in our strategy of developing our growing range of online electricals and adding new complementary categories that customers want and expect from AO.
“Mobile Phones Direct already has a leading position within the UK online mobile phone market and is a business which is highly complementary to AO. In coming together, AO will achieve instant scale and be well-placed for future opportunities within a highly attractive and growing UK mobile phone market.
“With 5G services expected to launch over the next two years and as the electrical products we sell become more connected than ever before, moving further into the mobile market is a logical next step for us.”
The transaction is currently subject to various conditions including AO World shareholder approval, FCA approval of the change of control of MPD and the CMA investigation.
The board of AO World has recommended its shareholders to vote in favour of the transaction, which is expected to close prior to 31 March 2019.
GlobalData’s retail analyst Zoe Mills said:”AO World has been focused on shrugging off consumer perceptions as a white goods specialist in favour of a well-rounded proposition. This is essential given the impact of weaker consumer demand on big ticket items like washing machines and fridge freezers, as housing transactions stagnate and consumer confidence remains low.
“While AO World already has a sim-free mobile phone range, Mobile Phones Direct gives the electricals specialist access to mobile networks, as well as the opportunity to develop its service proposition with the potential to expand into broadband services and complimentary smart devices. This also allows it to achieve instant access to this market with a well-established player rather than building relationships with network providers and developing this division from scratch, ensuring that it enters this new market with a competitive edge.”