Ocado to enter United States market with 'transformative' Kroger deal

Kroger inks Ocado grocery delivery deal to battle Amazon threat

Ocado to enter United States market with 'transformative' Kroger deal

Kroger, who has the second biggest grocer in the USA after Walmart, also agreed to buy a 5% stake in the United Kingdom online supermarket.

The plan is to roll out three customer fulfilment centres (giant automated warehouses) this year and a total of 20 over three years.

Rodney McMullen, Kroger's chief executive, said the partnership would the grocer "redefine the food and grocery customer experience - creating value for customers and shareholders alike".

Tim Steiner, Ocado's CEO, used the announcement to underline his belief "Ocado's unique, proprietary and industry-leading technology is set to transform the shopping experience of consumers around the world".

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.

Ocado said those will offset in part the total fees expected to be agreed between the two parties.

The positive share price reaction is as much a factor of Kroger's U.S. grocery market dominance, as being hot on the heels (and after a great deal of waiting) of similar deals in Sweden (ICA, 2 May 18), Canada (Sobeys, 22 Jan 18) and France (Casino, 28 Nov 17).

Shares in Ocado, the online grocery delivery platform, soared +44% to fresh record highs on news of another licensing agreement, this time with Kroger, which would allow the United States supermarket giant to use Ocado software to strengthen its own grocery-delivery network.

Ocado expects the earnings impact from the Kroger deal to be neutral in fiscal year 2018.

Earlier this month, it inked a deal to build Swedish supermarket ICA's online grocery business and it also has finalised deals with Canadian grocery Sobey's and french supermarket company Groupe Casino.

Ocado had kept investors waiting for years after setting out a strategy to grow faster by providing its technology to other supermarket chains overseas as well as being an online retailer in its own right.

The shares, which have more than tripled in value over the past year, were changing hands for 925p each, up 68% on the day.

"This is a sign that the momentum is very much behind Ocado in terms of its worldwide expansion".

Instead, it has taken the fight to the opposition with more than a little success. "That position now looks like a badly busted flush".

All in Numis got it spot on: this is a big deal...for everyone involved.

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