Marks & Spencer holding talks with Ocado over joint venture

Retailers in tie-up talks with announcement expected as soon as Wednesday, according to report

(PA)

Marks & Spencer has confirmed that it is in talks with Ocado regarding a tie-up.

M&S said that there was “no certainty” that the discussions would result in an agreement, but shares in both companies rose after the news.

Ocado shares 12.5 per cent before lunchtime while M&S was up 4 per cent.

M&S will pay Ocado between £800m and £900m for a 50 per cent stake in the new joint venture, with an official announcement to come as soon as tomorrow, according to the Evening Standard.

The deal will reportedly split Ocado in two and values the online grocer’s 721,000 customers at around £1.8bn.

Marks & Spencer chairman Archie Norman has been attempting to turn around the retailer which faces stiff competition from cheaper rivals and a deteriorating outlook on the high street.

If the deal goes through M&S could buy distribution centres, delivery vans and lorries from the online food retailer.

Ocado has made rapid recent progress in the online grocery market but suffered a devastating fire at its high-tech Andover warehouse earlier this month.

Ocado shares fell 8 per cent following the announcement of a potential slowdown until it can shift operations to other locations.

The warehouse provides around a tenth of Ocado’s capacity, processing more than 30,000 orders a week.

Ocado said the shutdown means there will be a “constraint on our ability to meet our growing customer demand”.

Sophie Lund-Yates, Equity Analyst at Hargreaves Lansdown, said: “Investors will be breathing a sigh of relief on the back of this announcement, even though a deal isn’t definite. It’s enough to know Ocado has the interest of one of the biggest retail names in the UK..”