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FTSE 250: Moonpig shares leap on £124m Smartbox deal

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Moonpig said the move will help it accelerate its growth strategy. Photo: by Pavlo Gonchar/SOPA Images/LightRocket via Getty
Moonpig said the move will help it accelerate its growth strategy. Photo: by Pavlo Gonchar/SOPA Images/LightRocket via Getty

UK retailer Moonpig (MOON.L) shares bounced on Monday after it agreed to acquire gifting experience business Buyagift.

The FTSE 250 (^FTMC) firm will pay £124m ($156m) to buy Smartbox Group, which owns the Red Letter Days and Buyagift brands.

The acquisition, which is expected to complete by the end of July this year, will see the integration of Buyagift’s products into Moonpig’s platform to help drive cross sell opportunities.

The online card specialist said the move will help accelerate its growth strategy as it taps into growing demand for experience gifts over physical products.

Moonpig added that the UK gift experience market was worth around £6bn.

Shares jumped as much as 12% in early trading on Monday in London, up 10.5% at the time of writing.

Analysts say Moonpig's deal is "logical" to help it increase its presence in the gifting market and branch out into more expensive experiences.

Russ Mould, investment director at AJ Bell, said: "The purchase of Buyagift includes Red Letter Days, a business previously owned by Dragon’s Den judge Rachel Elnaugh until it collapsed into administration in 2005, blamed on over-expansion.

"Fellow Dragon’s Den stars Peter Jones and Theo Paphitis rescued the business before selling it in 2017. Once again it passes to a new owner."

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In the latest financial year, Buyagift reported unaudited revenues of £44m and earnings before tax and interest of £14m. Annual revenues at Moonpig are forecast to increase to £350m this year.

It told shareholders that it expects to accelerate Buyagift’s revenues for the current year as result of growth in customers. Buyagift has a base of 3.3 million customers.

Moonpig chief executive, Nickyl Raithatha said: "There is strong strategic rationale for the transaction, and compelling financial benefits.

"Buyagift is profitable and highly cash generative, with a proven track record of strong growth and we are excited by the ways that we can further transform the business using the group’s proven playbook."

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