M&S pays 750 million pounds to seal Ocado online food tie-up

M&S pays 750 million pounds to seal Ocado online food tie-up
FILE PHOTO: Chicken is displayed at an M&S food hall in northwest London July 8, 2014. REUTERS/Suzanne Plunkett/File Photo   -  Copyright  Suzanne Plunkett(Reuters)
By Reuters

LONDON (Reuters) – British retailer Marks & Spencer (M&S) has agreed a joint venture with online supermarket pioneer Ocado that would give M&S a full online food delivery service for the first time, the companies said on Wednesday.

Under the deal M&S, Britain’s best-known stores group, will buy a 50 percent share of Ocado’s UK retail business for up to 750 million pounds.

M&S said it will finance the deal from a rights issue of shares to raise up to 600 million pounds. It will also cut its dividend by 40 percent to “a sustainable level”.

M&S, a 135-year-old clothing and food retailer, is a mainstay of Britain’s shopping streets but has struggled to cope with the rise of fast fashion, discounters and online shopping.

The firm sells wine, flowers and clothes online, but does not offer a full delivery service for its food, putting it at a disadvantage to rivals such as Waitrose and Britain’s two biggest supermarkets Tesco and Sainsbury’s.

Shares in Ocado closed up 11.7 percent on Tuesday, while M&S shares closed up 3.2 percent, after talks between the companies were confirmed following months of speculation over a deal.

The joint venture will mean Ocado ends a two-decade supply deal with up-market supermarket Waitrose which is owned by the John Lewis Partnership.

Ocado’s existing deal with Waitrose is due to end in September 2020 with Ocado required to give 18 months notice that it does not intend to extend the relationship.

Waitrose confirmed that its commercial arrangement with Ocado will end in September 2020.

(Reporting by James Davey; Editing by William Schomberg)

You might also like