Published: Thu, May 17, 2018
Finance | By Claude Patterson

Ocado's Major Kroger Deal May Open Up M&A Potential: Street Wrap

Ocado's Major Kroger Deal May Open Up M&A Potential: Street Wrap

Online retail specialist Ocado has signed its fourth global deal, with the announcement that it will be supplying its Ocado Smart Platform technology to Kroger in the US. Kroger taking a 5 percent stake in Ocado may also pave the way for M&A options in the future, according to Berenberg.

While Ocado's share surge today burnt hedge funds, short selling volumes stand at one-year lows - more than 20 per cent of the firm's stock was on loan around this time last year.

Ocado shares were trading nearly 80% higher on Thursday afternoon - reaching £10 per share at one stage.

Rodney McMullen, chairman and chief executive of Kroger, said: "We see Ocado as an innovative, exciting and transformative partnership in pursuit of our Restock Kroger vision, to serve America through food inspiration and uplift".

"Ocado's unique, proprietary and industry-leading technology is set to transform the shopping experience of consumers around the world", said Tim Steiner, CEO of Ocado Group.

"Ocado believes Kroger to be the grocer best-positioned to win in U.S. grocery and will discontinue discussions with other US-based retailers", the companies said in a statement.

The company claimed the value of the Kroger partnership was worth more than the others in France, Canada and Sweden combined.

With a net short position of one per cent, according to regulatory filings, Marshall Wace booked a paper loss of around £15m within minutes after Ocado shares rose 40 per cent this morning.

The deal, which follows recent similar deals with Groupe Casino in France, Sobeys in Canada, ICA in Sweden and Morrisons in the United Kingdom, means Kroger can make exclusive use of Ocado's Smart Platform technology for what the British firm described as "grocery and other food distribution-related activities". The short sellers were hoping Ocado wouldn't deliver on its global expansion plans, that position now looks like a badly busted flush.

The news sent Ocado's shares up 31pc in early trade to 725p.

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