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M&S bags food delivery venture with Ocado in £750m deal | Business News



Marks and Spencer (M&S) is to raise up to £600m from investors to help pay for a deal with Ocado that will see the retailer’s food delivered to homes for the first time.

The companies confirmed the joint venture less than 24 hours after it admitted that talks were taking place, prompting sharp increases in their respective share prices.

The terms mean Ocado’s current delivery partner, Waitrose, will be dumped by the roadside at the conclusion of its current contract following a period of reported rocky relations between the pair.

M&S said it was paying up to £750m for a 50% share of Ocado’s UK retail arm, which would trade as from September 2020 at the latest.

M&S has reportedly explored splitting the food offering from its wider retail operation. Pic: M&S
The venture will see M&S groceries delivered to homes for the first time

It said the rights issue to fund the deal would be launched in due course, adding it would “reset its dividend by 40% to a sustainable level from which to grow in line with earnings over time.”

The deal represents a major investment in online retail for M&S at a time when its in-store fashion and homewares offerings continue to struggle.

The company had previously indicated a greater focus on food through its plans to close non-performing stores as the popularity of shopping through digital channels gathers pace.

For Ocado, it provides the company more money to invest in its automated warehouse technology as it faces serious questions following a fire that gutted its Andover site last month.

The area has been evacuated. Pic: Fareham fire station
Firefighters reported difficulties getting to the seat of the Andover fire.Pic: Fareham fire station

M&S chief executive Steve Rowe said: “I have always believed that M&S Food could and should be online.

“Combining the strength of our food offer with leading online and delivery capability is a compelling proposition to drive long-term growth.

“Our investment in a fully aligned joint-venture with Ocado accelerates our Food strategy as it enables us to take our food online in an immediately profitable, scalable and sustainable way.

“Combining the magic of M&S Food with Ocado’s leadership in online technology allows us to transform UK online grocery shopping.”

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M&S deal: ‘Ocado’s opportunity to break with Waitrose’

His Ocado counterpart, Tim Steiner, said: “We are delighted that our UK retail business will become a joint venture with M&S.

“This is a transformative moment in the UK retail sector with the combination of two iconic and much-loved retail brands set to provide an unrivalled online grocery offer.”

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