UK – British retailer, Marks and Spencer (M&S) has acquired 50% stake in a newly formed online grocery joint venture with online supermarket chain, Ocado for a consideration of US$996.67 million (£750 million).
Under the terms of the agreement, the London based firm is acquiring a 50% share of Ocado’s UK retail business, which will be supported by Ocado Smart Platform.
According to M&S, the 50/50 Joint Venture is set to ‘transform online grocery shopping for UK consumers.’
Trading as Ocado.com, the new venture 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.
Migration of the JV sourcing will be transferred to M&S in 2020 after the termination of Ocado’s current sourcing agreement with Waitrose.
From then on, the JV will have exclusive rights to sell M&S’s full range of food and beverage products online.
Upon completion of the transaction, M&S Food is expected to benefit from at least US$93 million (£70 million) in synergies by the third year, from increased buying scale, harmonised buying terms, conversion of M&S customers, joint marketing, shared innovation, to complementary category and regional mixes.
“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,” said Steve Rowe, M&S CEO.
The transaction which is expected to close in the third quarter of 2019, is part of M&S’s business transformation strategy to unlock growth within its food business.
The company is set to benefit from Ocado’s delivery innovations, such as the Ocado ‘Zoom’ trial as well as achieving online growth.
The online grocery sector is forecast to be the fastest growing channel in the UK, predicted to increase from an £11 billion (US$14.63 billion) market in 2018 to £17 billion (US422.61 billion) in 2023.
“We are delighted that our UK retail business will become a joint venture with M&S. This is a transformative moment in the UK retail sector with the combination of two iconic and much-loved retail brands set to provide an unrivalled online grocery offer,” said Tim Steiner, Ocado CEO.
“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.”