Refurbished electronics retailer musicMagpie has confirmed talks over a possible sale to telecoms group BT and the private equity owner of Footasylum and The Body Shop.
MusicMagpie said discussions with BT and Aurelius were ongoing, but at a “very early stage”, sending its shares surging 28% higher in Monday morning trading.
The takeover talks come after musicMagpie has seen its shares slump since a stock market flotation two-and-a-half years ago, which valued the group at more than £200 million.
Its shares are now worth less than £20 million, with the stock trading at 18.75p at market close on Friday, and the group understood to have recently called in consultants at Deloitte to review its options, including a sale.
BT and Aurelius now have until December 18 to make a firm offer or walk away.
News of the talks follow less than a week after Aurelius agreed a cut-price deal to buy cosmetics retailer The Body Shop from Brazil’s Natura & Co for up to £207 million.
Stockport-based musicMagpie has seen shares come under pressure since the pandemic, with trading hit earlier this year by postal strikes and poor consumer confidence.
Its US business, Decluttr, has also struggled to make headway in the American market.
Revenues across the group plunged 14% to £61.9 million from £71.3 million a year earlier, leaving widened pre-tax losses of £3.2 million in the six months to May 31 against previous half-year losses of £1 million.
The firm’s US sales tumbled from £18.4 million to £14.7 million in the first half.
The rise of streaming services have taken their toll on its traditional business buying and selling unwanted DVDs and disc media, while book sales remained in decline as expected, falling to £20.9 million from £25.3 million a year ago.
But musicMagpie said it was hoping for a second-half boost, given that peak trading is seen around Black Friday in November.
The group was launched in 2007 selling second-hand CDs and later expanding into DVDs, books and video games.
It now also recycles mobile phones and tech gadgets for resale.
Analyst Kester Mann at CCS Insight said BT’s takeover interest in musicMagpie was a “surprise”, but likely ties in with the recent push by the group’s EE arm into retailing.
He said: “The firm said that it aims to push harder into consumer electronics retailing by offering a broader range of products to both existing and potential customers using a new digital platform called EE ID.
“Acquiring an existing retail brand could accelerate this strategy as EE looks to stir more engagement with its customers and promote greater use of its app.”
He added that the possible deal also “reflects the burgeoning market for second-hand devices”, with CCS Insight estimating that nearly a third (32%) of all mobile phone shipments will be second-hand by 2027.
“This industry trend is due to several factors, including the increasing residual value of smartphones, widespread trade-in schemes, greater availability of refurbished phones, cost-of-living concerns and environmental considerations,” according to Mr Mann.