M&S and Ocado to transform online grocery shopping

M&S and Ocado to transform online grocery shopping

Marks & Spencer has announced the creation of a new 50/50 Joint Venture with Ocado that will transform online grocery shopping for UK consumers. 

Under the JV, M&S is acquiring a 50% share of Ocado’s UK retail business, which will be supported by Ocado Smart Platform for a total consideration of up to £750 million, including a deferred consideration of up to £187.5 million, plus interest.

The JV combines the strength of M&S’s brand and its leading food quality and innovation with Ocado’s unique and proprietary technology to create an unrivalled online offer for customers. In bringing the best together the JV will benefit existing and new UK customers, colleagues and suppliers.

The JV will trade as Ocado.com but benefit from access to M&S’s brand, products and customer database from September 2020 at the latest, following the termination of the current Waitrose sourcing agreement and migration of JV sourcing to M&S.

Steve Rowe, M&S CEO 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. This is a transformational step forward in shaping the future of M&S and in becoming a truly digital first retailer with at least a third of the business online.”

For the 52 weeks ended 2 December 2018, the newly created JV would have generated revenue of £1,468 million and EBITDA2 of £34.2 million, taking into account the newly created OSP contract and other fees and services. Furthermore, under the new sourcing arrangement the JV will no longer incur sourcing fees payable to Waitrose, which were over £15 million in 2018.

Tim Steiner, Ocado CEO said: “We believe that this is the best outcome for customers, offering even greater range, service, quality and value; the best outcome for our Ocado Solutions partners, creating a stronger platform from which to innovate and develop our unique and proprietary technology; the best outcome for Ocado Solutions with a further endorsement from another leading global retailer; and the best outcome for our financial stakeholders, unlocking the significant value embedded in Ocado Retail.

“The combination of Ocado and M&S will allow us to grow faster, add more jobs, and create more value, as we lead the channel shift to e-commerce here in the UK. We are very excited by the many opportunities ahead.”

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