Possible M&S x Ocado joint venture

So

Earlier on Tuesday, London’s Evening Standard reported M&S would pay Ocado between £800m and £900m for a 50 per cent stake in the joint venture, which could be announced as soon as tomorrow.

both company’s shares have risen on the back of the deal but it’s a bit of a strange one because

Ocado has recast itself has a provider of robotic warehouses to supermarkets as grocers have struggled to make home deliveries pay.

But apparently this makes sense for Ocado because

“It is too early to lose their retail business as it is an essential and unbeatable part of the sales pitch to global customers (i.e. they are not just selling you some hardware/software, they operate it very successfully in the most competitive grocery e-commerce market in the world).

& for M&S as

as the high street chain seeks to catch up with rivals in grocery deliveries

Ocado stock rockets 10% after M&S confirms joint venture talks - Yahoo Finance

Ocado and M&S in talks over UK retail joint venture

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I invested in Ocado at £1 ages ago, and sold at £2, then it went up to £10 recently. This is my best and worst stock I think :rofl:

I do think Ocado has a future though and are right to keep operating to actually dogfood their systems and get feedback on what works and what doesn’t. As a customer they get a lot of things right (though the website is not great, apps are quite good), and supermarkets are finding it very difficult to compete in this space somehow, probably because it is such a paradigm shift for them.

I now wish I hadn’t sold so soon. They have a tricky road ahead of them but also have a huge global market of customers who just don’t get JIT centralised delivery of groceries and because of their high street shops find it hard to consider moving to such a model.

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Thought you’d find this interesting. Ocado shares have risen and may continue based off this.

Worth watching

M&S 1.8bn JV with Ocado

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Thanks for sharing… I can absolutely see the benefit for Ocado. Just shy of a bn investment for a new venture, less risk to them and they have a stronger digital presence.

M&S feels like a survival move, they won’t see an ROI for 5+ years on this imo

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I think you’re spot on.

Man it’s a shame when that happens… but atleast u got some profit. I wouldn’t try and get into Ocado just yet. The RSI signals Iran overbought currently… I’d wait for people to sell off their quick profits, let it correct and invest for the long term though… my opinion but I think they’ll be a good buy for 3-5yr period

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Confirmed this morning: https://uk.mobile.reuters.com/article/amp/idUKKCN1QG0RL M&S will pay 750m for 50% of Ocado’s UK retail business (not their tech/robowarehouse platform business).

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How are these companies going to fund this? Seems a lot of cash for two business that aren’t cash-rich

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I think M&S will do it with 600m new debt. Dunno if Ocado’s putting any cash in.

From the FT report this morning:

M&S said the pact will be “primarily” funded with equity. The board plans to conduct a rights issue to raise up to £600m, while the group will also reduce its dividend by 40 per cent to a “sustainable level from which to grow in line with earnings over time.”

Interesting, how would Freetrade shareholders be able to accept/decline a rights issue?

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Cheers for that. I wouldn’t be happy with that if I held M&S - total returns will get panned by placing a big bet on something non-core.

I’m still hopeful it works. Would be nice to see some British tech making big moves again

You could argue that Ocado has been a tech story for a long time: the platform business (the ecommerce-warehouse-delivery bits) seems to be doing ok and holds most of the valuation, they’re getting deals in Eu and US…

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As you say, this move makes a lot of sense in that context -