M&S share price surges after Ocado joint venture deal confirmed

Marks & Spencer (M&S) and Ocado saw their share prices surge more than 4% and 12% respectively on Tuesday after the pair confirmed rumours about a £1.8 billion joint venture deal.

If finalised the joint venture would give M&S a food delivery service for the first time, which the company has been under pressure to create to keep pace with its rivals.

M&S and Ocado joint venture talks confirmed

According to a report by the London Evening Standard, under the terms of the new joint venture M&S will pay Ocado between £800-900 million in exchange for a 50% stake in the food delivery company.

It remains unclear how M&S will finance the deal, with the company holding around £1.8 billion in debts on its balance sheet, suggesting that the joint venture will require a cash call on shareholders.

M&S was quick to point out that the pair are in discussions and no formal agreement had been reached at this stage.

Ocado to sever ties with Waitrose over M&S deal

According to reports, the pair are hoping to finalise a deal before March 1, so Ocado can activate its 18-month break clause with Waitrose, who has supplied its groceries in partnership with the delivery service for the last 20 years.

Ocado’s partnership with Waitrose is due to end in September 2020.

The deal with M&S will satisfy Ocado’s CEO Tim Steiner, who is keen to focus on licensing its platform to retailers, with the company agreeing such deals with businesses in Sweden, the US and Canada – adding £6 billion to the delivery service providers stock valuation.