Frasers Group plc announced it has acquired a strategic stake of 18.9% in Bolton-based online electrical retailer AO World plc.
Frasers, formerly called Sports Direct, is majority owned by Mike Ashley.
Frasers bought 109.4 million shares at 68p for an investment of £75 million.
Reuters reported that the shares were bought from crisis-hit Odey Asset Management.
AO World shares rose about 9% to around 76p on Monday.
AO World founder and CEO John Roberts said: “This is great news for AO and a fantastic endorsement for our business.
“We are delighted to welcome Michael and the wider Frasers team into the AO family and 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 and we’re very much looking forward to working with Michael and his team.”
Frasers Group CEO Michael Murray 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.
“Through this investment, Frasers will benefit from AO’s valuable know-how in electricals and two-man delivery, helping us to drive growth in our bulk equipment and homeware ranges.
“In turn, AO will have the opportunity to benefit from Frasers’ expertise and ecosystem.”
REACTION:
Victoria Scholar, Head of Investment, Interactive Investor: “Although the pair may initially appear to be an unlikely match, on closer inspection, there are potential synergies between the two retailers in terms of at-home appliances with Frasers’ sofa range complementing AO’s white goods offering.
“Shares in AO World have struggled over the last year, trading flat over the past 12 months until Friday’s close, as the cost-of-living crisis prompts consumers to hold off from purchasing big-ticket items like fridges and washing machines.
“But given the recent recovery off last year’s lows for its shares, Frasers Group clearly judges that now is a good time to pounce in case the recent recovery continues, and shares become even dearer.
“The vote of confidence is providing a significant boost to shares in AO World this morning which are currently up by over 7%.
“The deal is part of Frasers’ broader intelligent strategy to acquire and build stakes in other businesses with the goal of positioning itself as a consumer platform for the world’s best brands to provide ‘a world-leading retail ecosystem.’
“White goods could become another string to its bow.”