Ocado strikes 'transformational' deal with United States giant Kroger

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United Kingdom online grocer Ocado has struck another licencing deal with an worldwide food retailer, announcing this morning (17 May) US giant Kroger will use its technology for food deliveries.

Kroger, which is second only to Walmart in terms of U.S. market share, with revenues previous year of $122bn (£90bn), will also take a 5pc stake in the FTSE 250 firm at a value of £183m. Kroger taking a 5 percent stake in Ocado may also pave the way for M&A options in the future, according to Berenberg. It started distributing groceries for Waitrose and floated in 2010.

The shares soared as much as 51 percent to a record high, adding about 1.8 billion pounds ($2.4 billion) to the market value and making the company a potential candidate for inclusion in the FTSE 100.

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.

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Ocado Group PLC, which runs online delivery services and makes related software, said Thursday it's signed a partnership agreement with supermarket chain The Kroger Co.

Ocado has signed a string of similar technology deals with major supermarkets in France, Canada and Sweden.

Tim Steiner, Ocado's CEO, used the announcement to underline his belief "Ocado's unique, proprietary and industry-leading technology is set to transform the shopping experience of consumers around the world".

"Our success as a retailer shows that we can offer customers unrivalled choice, quality and convenience, efficiently and profitably".

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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".

"Shares are priced for these deals to be coming thick and fast".

"This is a sign that the momentum is very much behind Ocado in terms of its worldwide expansion". Kroger buying new shares in Ocado will also dilute earnings.

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