Ocado Group Surges 40% After Announcing 25-Year Online Partnership With Wm. Morrison Supermarkets

LONDON -- The shares of Ocado  (LSE: OCDO  ) surged 81 pence, or 41%, to 285 pence during early London trade this morning, after the food delivery service announced a 25-year agreement with Wm. Morrison Supermarkets  (LSE: MRW  ) .

Ocado, which currently delivers around 131,000 orders a week, mostly on behalf of Waitrose, said it would sell a delivery facility in the Midlands, various mechanical equipment, as well as technical licenses to Morrisons for 170-million pounds.

The shares of Morrisons edged three pence, or 1%, higher, to 286 pence, after the supermarket confirmed it would spend a further 100 million pounds on other website developments. The FTSE 100 member also revealed it had lifted its debt guidance for the year to 2.7 billion pounds.

Tim Steiner, Ocado's chief executive, said this morning, "We see Morrisons' decision to adopt our model to drive its online launch as a further endorsement of our technological and logistical excellence."

Dalton Philipps, the chief executive of Morrisons, added: "This agreement is a significant strategic step for Morrisons. From a standing start, Morrisons will be competing in the fast growing online channel by the end of this year with a really compelling proposition."

The finer details of the agreement include Morrisons paying Ocado an annual IT fee of 1% of Morrisons.com's revenue, an annual bonus fee set initially at 25% of Morrisons.com operating profit, and an R&D fee of up to 8 million pounds a year.

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10/2/2014 4:47 AM
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Ocado Group CAPS Rating: No stars

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