£250m deal to turn Ocado into a global tech leader

OcadO shares soared by as much as 75pc after a landmark deal with one of america’s biggest supermarkets transformed it into an international technology heavyweight.

The agreement, which saw Ocado’s value climb by more than £2bn, will see it provide Kroger with at least 20 warehouses and robotic technology for an online grocery delivery service.

It marks a first step into the lucrative US market, giving Kroger exclusive access to Ocado’s sophisticated warehouse technology. and it was a major blow to hedge funds which believed that it would never strike a major deal and so bet against the company’s shares. They were nursing losses in the region of £100m ( seeright).

Kroger is the third-largest retailer in the world by revenue and has 2,800 stores with about 9m customers a day. Last year it pulled in revenues of £91bn.

The US grocery chain will also spend £183m on new Ocado shares, building its 1pc stake to 5pc, worth £250m overall.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: ‘Ocado is making great strides in the global grocery market, and inflicting serious financial pain on those who have bet against it.

‘It is known in the UK as an online supermarket, but that’s just the tip of the iceberg as Ocado is primarily a technology and logistics firm with the potential to license its services to grocers around the world.’

Ocado shares ended the day up 44pc, or 245.2p, at 797.2p. at one point they traded as high as 997p, before investors cashed in their giant profits.

The deal marks a victory for chief executive Tim Steiner, who has beaten sceptical investors to prove that he can land key deals with international supermarkets.

Steiner, 48, set up Ocado back in 2000 with Goldman Sachs colleague Jason Gissing and his lifelong friend Jonathan Fairman.

In 2016 he left Belinda, his wife of 14 years and mother of his four children, and moved in with the Polish lingerie model Patrycja Pyka, 20 years his junior. Last month London Stock Exchange filings revealed Steiner used more than 25m shares as collateral for a loan to fund divorce obligations.

But he has been credited with turning Ocado into a stock market darling worth £5.4bn, putting it on the fringes of entering the FTSE 100 for the first time.

Steiner said the ‘transformative’ Kroger deal will ‘reshape the food retailing industry in the US in the years to come’.

Traditional retailers are locked in a fight with online giant amazon, which is aggressively moving into food sales.

Ocado has been on a roll since November when it secured its first overseas deal, with Groupe casino in France. Shares have soared 150pc since, and it has scored contracts with Sobeys in canada and Ica in Sweden.

Kroger and Ocado are looking for three sites this year for warehouses, and want 20 within three years. If Kroger does not fulfil that quest, Ocado can strike deals with rival supermarkets. Ocado chief financial officer duncan TattonBrown said: ‘One of the real benefits of announcing the deal is we can operate with more urgency, with more pace to hire more people and further improve our ability to execute deals like this. We expect to do a lot more. This creates a sense of urgency for the companies we’re in talks with right now.

‘If you want to sign with us then you need to get on with it.’

The deal is expected to protect Ocado against the threat of a takeover from amazon, which has been looking to expand its position in the UK grocery market ever since it bought Whole Foods for £10.3bn last year.

amazon’s growing presence in grocery was a key reason behind the proposed £14.1bn Sainsbury’s and asda merger.