Marks & Spencer and Ocado confirm £750m home delivery deal

Shares in M&S dropped in early trading as the retailer unveiled plans for a rights issue to raise as much as £600m

Marks & Spencer and Ocado have agreed a new home delivery deal, bringing to an end the online grocer’s longstanding partnership with Waitrose.

M&S will pay £750m for half of Ocado’s UK retail business as part of a joint venture, which will trade as Ocado.com but sell M&S branded products and make use of the high street chain’s customer database.

M&S is planning a rights issue to raise £600m and will also cut its dividend by 40 per cent in order to fund the deal.

The new partnership is set to launch in September 2020.

Tim Steiner, Ocado’s chief executive, said the deal was 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,” he added.

“The combination of the qualities 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 in the UK. We are very excited by the many opportunities ahead.”

Steve Rowe, chief executive of M&S, 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.

“Combining the magic of M&S Food with Ocado’s leadership in online technology allows us to transform UK online grocery shopping 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.”

Shares in Ocado jumped as much as 6.7 per cent, while M&S stock fell 7.5 per cent.