AO World Plc has struck a major deal to buy an online-only retailer of mobile phones with millions of visitors and almost £122 million in annual revenue.

AO will acquire Mobile Phones Direct (MPD), which operates through online brands Mobile Phones Direct and Smart Phone Company, for a cash-free, debt-free enterprise value of £32.5 million.

 The deal is being led by the Manchester office of Deloitte.

The listed company said the acquisition, which is expected to complete before 31 March 2019, would "significantly" increase the scale and sophistication of its mobile proposition.

MPD's websites had approximately 13.6 million visitors in 2017, with the group generating turnover of £121.7 million in the year ended 31 March 2018.

"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," said CEO Steve Caunce.

He added: "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."

Richard Baxendale, current CEO of Mobile Phones Direct, described the deal as "an exciting moment" for both organisations.

"MPD's experience of the mobile market will give AO a fantastic platform to expand this category and will crucially, enable both of us to offer an even more compelling proposition to our customers," Baxendale added.

AO will pay a total of £38.1 million to acquire MPD, including £20.9 million in cash and the remaining balance in AO shares.

Alongside the deal, the company also provided an update on its own trading and said it was "performing well" against the backdrop of a declining MDA (major domestic appliances) market in the UK.

AO generated group revenue of £404.2 million in the six months to 30 September 2018, an increase of 9.9 per cent from a year earlier.

Jefferies International is acting for AO as sponsor and financial adviser in relation to the acquisition.

The Manchester office of Deloitte has provided corporate finance advisory services (Andy Westbrook and Chiara Pettinicchio), financial due diligence (Jodi Birkett and Emma Johnston), reporting accountant work (Jodi Birkett, Tim Grogan, Adam Batson and Dan Murphy), tax advice and valuation services to AO World.

Flick through our interactive digital magazine

E-edition cover