MusicMagpie has confirmed that talks about a potential sale to either BT Group or investment company Aurelius are underway.
The Stockport-based business, known for selling secondhand electronics, said talks were at ‘a very early stage’ and that there was ‘no certainty’ of an offer being made from either party.
Since MusicMagpie went public on the London Stock Exchange two years ago, the firm’s value has plummeted by around 87 per cent as loosening Covid-related restrictions and economic uncertainty have led to trade slowing down.
Founder: MusicMagpie was started by Walter Gleeson and Steve Oliver (pictured) in 2007
It has also struggled to become profitable due to higher costs from sourcing goods and its growing use of third-party platforms, such as Amazon, eBay and BackMarket.
For the six months ending May, MusicMagpie saw pre-tax losses more than triple to £3.2million and turnover drop by £9million to £62million.
Books and disc media sales declined at a faster-than-anticipated pace, falling by £4.5million to £20.8million, while demand for consumer technology goods shrunk by £4.8million to £41.2million.
The group blamed the overall half-year performance on weak consumer confidence and postal strikes around the Christmas and New Year periods.
It warned that trading conditions remained challenging but said annual forecasts were expected to be fulfilled because of cost savings, improving momentum, and its focus on high-margin sales.
MusicMagpie shares soared 26 per cent to 23.7p on Monday morning following the announcement of takeover talks, making them one of the top five risers on the Aim All-Share Index.
One of its possible suitors, Lloyds Pharmacy-owner Aurelius, just agreed to buy The Body Shop, the beauty retailer famous for selling vegan-friendly cosmetics, from its Brazilian owner Natura & Co in a £207million deal.
Both Aurelius and BT have until 5pm on 18 December to declare a firm proposal for MusicMagpie or say they are walking away.
Russ Mould, investment director at AJ Bell, said: ‘BT and its mobile brand EE deal in large volumes of phones, so having an in-house refurbishment business in the form of MusicMagpie would make sense.
‘It also helps that the latter is going cheap, having been a disaster since it joined the stock market a few years ago.’
MusicMagpie was founded from a Stockport garage by Walter Gleeson and Steve Oliver, who had been the managing director of high-street entertainment retailer Music Zone until its collapse in 2007.
Starting out as a CD and DVD reseller, the firm received an early boost when Martin Lewis recommended the company on television.
A £10million cash injection from private equity group LDC in 2011 helped the group fund expansion into North America, where it trades under the name Decluttr.
It now resells everything from phones to laptops, smartwatches and game consoles and also offers subscription services allowing customers to rent electronics.