Ocado shares rise 47 per cent on back of Kroger deal

Ocado shares rise 47 per cent on back of Kroger deal

The $20 billion USA supermarket will have exclusive US rights to use Ocado's food-delivery technology and will take a 5 percent stake in the United Kingdom company.

The deal boosts Kroger's stake in Ocado, whose shares popped more than 50 percent in premarket trading, by 5 percent to 6 percent.

Ocado said it will begin setting up Kroger with various systems to help it manage warehouse operations, automation, logistics and delivery route planning in the US. It started distributing groceries for Waitrose and floated in 2010.

"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.

Kroger, the largest US supermarket chain by revenue, operates about 2,780 supermarkets in the USA and has some 443,000 employees. "As we work through the terms of the services agreement with Kroger in the coming months, we will be preparing the business for a transformative relationship which will reshape the food retailing industry in the U.S. in the years to come".

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Now, the two companies are working to identify the first three sites for the development of new, automated warehouse facilities and will identify up to 20 sides over the first three years of the agreement.

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.

Rodney McMullen, chairman and CEO of Kroger, said the retailer is on a mission to develop new customer experiences by investing in technology.

"We are actively creating a seamless digital experience for our customers. Our partnership with Ocado will speed up our efforts to redefine the food and grocery customer experience - creating value for customers and shareholders alike". Ocado said it expected the earnings impact of the deal to be neutral in full-year 2018.

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