Business

Kroger shares rose on Ocado deal amid busy week for M&A news

Kroger shares rose on Ocado deal amid busy week for M&A news

Britain's online supermarket Ocado OCDO.L clinched a game-changing deal with Kroger KR.N as its exclusive partner in the US, securing its entry into the world's biggest market and sending its shares up 50 percent.

Kroger is the fourth worldwide partnership for Ocado and its fifth in total as it has looked to expand, not as an online grocer but more as a technology solution provider.

Kroger will begin with three sites in 2018, and has a goal of up to 20 fulfillment centers for the first three years of this arrangement said Ocado.

A Kroger spokesman said the Instacart relationship was unaffected by the Ocado deal, adding that it viewed them as "complimentary".

"We look forward to innovating together with Ocado to provide our customers the best possible online and in store experience", said Alex Tosolini, senior vice president of Kroger business development.

Kroger is one of the world's biggest grocery chains with annual sales of $122 billion.

Ocado chief executive Tim Steiner said the deal would be "transformative" for the business. This is being done though a subscription rights agreement and brings its total investment in OCDGF to 6%. "Our partnership with Ocado will speed up our efforts to redefine the food and grocery customer experience".

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The Kroger deal is definitely Ocado's biggest yet but certainly not its first.

Kroger operates almost 2,800 stores in 35 USA states and has a turnover of more than $115 billion (£85 bn).

Under the partnership, the pair are looking to open three similar sites in the U.S. this year - with a further 17 in the pipeline. It has struck partnerships with Groupe Casino in France, Sobeys in Canada, and ICA Group in Sweden.

Kroger demonstrated its commitment to the Anglo-American alliance by subscribing for 33.1mln Ocado shares worth £183mln, which would give it a 5% share of the United Kingdom business. If the retailer fails to hit volume targets it could also lose exclusivity and will have to pay compensation to Ocado.

Ocado is known for fast deliveries and, according to CNN Money, Ocado said it will be helping Kroger with warehouse operations, logistics, delivery route planning and automation.

Bearish hedgies ate humble pie, with those shorting Ocado registering as much as a £282m paper loss at one point in the day, before shares eased back.


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