Marks and Spencer Group and Ocado Group have announced a joint venture (JV) that will transform online grocery shopping for UK consumers.
Under the JV, M&S is acquiring a 50% share of Ocado’s UK retail business, which will be supported by Ocado Smart Platform, for a total consideration of up to £750m, including a deferred consideration of up to £187.5m, plus interest.
The JV 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 our customers. In bringing the best together the JV will benefit existing and new UK customers, colleagues and suppliers.
The JV will trade as Ocado.com but benefit from access to M&S’s brand, products and customer database from September 2020 at the latest, following the termination of the current Waitrose sourcing agreement and migration of JV sourcing to M&S.
Joint Venture highlights include:
• A strategically compelling route to unlock growth for M&S Food through a profitable, scalable presence in the online grocery market, the UK’s fastest growing channel;
• A fully aligned partnership with complementary skills and assets; M&S, one of Britain’s highest rated food brands with strong product development capabilities, and Ocado’s pioneering OSP technology and operational efficiency;
• Long-term value creation opportunities for both M&S and the JV. Customers will benefit from the broadest range in UK food retail and the JV will benefit from access to over 12m M&S Food shoppers;
• For the 52 weeks ended 2 December 2018, the newly created JV would have generated revenue1 of £1,468m and EBITDA2 of £34.2m, taking into account the newly created OSP contract and other fees and services. Furthermore, under the new sourcing arrangement the JV will no longer incur sourcing fees payable to Waitrose, which were over £15m in 2018.
Steve Rowe, M&S CEO (pictured right) 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.”
Tim Steiner, Ocado CEO (pictured left) said, “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.
“We believe that this is the best outcome for customers, offering even greater range, service, quality and value; the best outcome for our Ocado Solutions partners, creating a stronger platform from which to innovate and develop our unique and proprietary technology; the best outcome for Ocado Solutions with a further endorsement from another leading global retailer; and the best outcome for our financial stakeholders, unlocking the significant value embedded in Ocado Retail.
“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.”