M&S and Ocado shares leap on joint venture talks
Investors delight in confirmation of rumours that the pair are discussing a new joint venture covering grocery deliveries.
Tuesday 26 February 2019 19:29, UK
Shares in both Ocado and Marks and Spencer (M&S) have risen sharply following confirmation of talks on a joint venture.
Both companies released statements to the City moments after the Evening Standard newspaper reported that a deal was imminent.
Ocado said: "Following media speculation, Ocado Group plc confirms that it is in discussions with Marks and Spencer Group Plc regarding a joint venture in UK retail.
"There is no certainty that these discussions will result in any agreement or as to the timing of any such agreement."
The announcement from M&S contained no further details. Its shares were initially 4% up, ending the day slightly lower at 3.2% while those of the online food retailer were 10% higher as the clock ticked down to midday, closing up nearly 12%.
Rumours about a deal, that would see M&S become Ocado's supply partner, have been swirling since January and would give the high street retailer its first online food delivery outlet.
It has been placing a greater emphasis on growing the food side of the business as it continues attempts to revive its flagging fashion and homeware offerings.
The Standard reported that the pair had been trying to secure agreement by 1 March - a deadline for triggering an 18-month break clause between Ocado and its current supply partner, Waitrose.
The paper said that M&S would effectively be paying to take control of Ocado's customer base of more than 700,000 households, leaving Ocado free to concentrate on the licensing of its robot-driven warehouse technology.
A series of deals with international companies has driven a rapid rise in Ocado's market value in recent years.
But a fire which gutted its automated warehouse in Andover last month has threatened to set back not only its deliveries but also its systems if the investigation finds fault with designs.
The owner of Waitrose, John Lewis & Partners, was yet to comment on the announcement.
Naeem Aslam, chief market analyst at ThinkMarkets, said: "M&S joining forces with Ocado is music to investors' ears. The news could not have come at a better time.
"The products offered by M&S have always been loved by its customers and M&S has a specific kind of clients who are not massively sensitive to price.
"They need quality products and M&S has that.
"It was lacking a reliable delivery source, and now with Ocado on its belt, this will improve the revenue.
"There is just huge potential for synergy and investors are paying attention to this."