Ocado shares rise 44% after major US tie-up
ONLINE grocer Ocado’s shares soared 44 per cent by 245¼p to 797¼p yesterday as it struck a deal for Kroger, one of America’s biggest retailers, to use its technology.
Around £1.5billion was added to Ocado’s market value, putting it on course for a place in the FTSE 100 with a £5billion-plus price tag as investors hailed a potentially game-changing partnership.
It is the latest endorsement for the food distribution expertise of Ocado, which tested patience by taking 15 years to make its first annual profit but has reeled off a string of international tie-ups in recent months with retailers in France, Canada and Sweden.
Kroger, which operates from 2,800 food stores and has annual sales of £90billion, will take a 5 per cent stake in Ocado as part of the exclusive tie-up.
The two companies are looking at three sites this year to develop new, automated warehouses.
This will rise to 20 over the first three years of the agreement, with Kroger paying compensation if it fails to commit to the target capacity.
Ocado chief executive, Tim Steiner, pictured, inset, said: “Our unique, proprietary and industry-leading technology is set to transform the shopping experience of consumers around the world. The opportunity to partner with Kroger to transform the way in which US customers buy grocery represents a huge opportunity to redefine the grocery experience of Kroger’s customers and create value for the stakeholders of both Kroger and Ocado.
“As we work through the terms of the services agreement in the coming months, we will be preparing the business for a transformative relationship which will reshape the food retailing industry in the US in years to come.” Numis analyst Andy Wade said: “This is clearly a transformative deal for Ocado, and one that is on a completely different scale to those announced in the past.”
Barclays added: “We think this is just about as positive a deal as could have been expected to have been announced. Ocado now has an extremely credible partner in the largest grocery market in the world.”