UK food and retail supermarket chain Marks & Spencer today signed a deal to pursue a joint venture with online supermarket brand Ocado, the Guardian reports. According to the terms of the agreement, Marks & Spencer will pay US$999mn to acquire a 50% stake in Ocado’s UK retail business, forming a new company that will trade under the name Ocado.com.
Ocado, which operates a supermarket home delivery service with Marks & Spencer competitor Waitrose, will begin providing a comparable service for its new partner when its Waitrose contract expires in September 2020.
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. Combining the magic of M&S Food with Ocado's leadership in online technology allows us to transform UK online grocery shopping by offering customers the broadest, most innovative and relevant range in UK food retail with award-winning service. Our partnership with Ocado will create shared value for our customers, colleagues, supplier partners and shareholders, operating with a common sense of purpose and values. 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."
In a statement, Tim Steiner, Ocado CEO said that, "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."
Marks & Spencer’s Food division reportedly expects to achieve synergies in excess of $93mn per year within three years.