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Business News

Online grocer Ocado shrugs off bid talk as more firms seek online tie-ups


Online grocer Ocado today said it was in talks over tie-ups with other retailers following its £170 million deal with Morrisons, but it denied receiving a takeover approach for its own  business.

The company, which has never made an annual profit, revealed it had been contacted by other interested parties looking to move online, although these are thought to be from overseas.

“We have had approaches and these conversations are ongoing,” boss Tim Steiner said. “However, at the moment it is about delivering our existing arrangement with Morrisons to help launch and operate their online  grocery business.”

Shares in Ocado — which floated in 2010 at 180p — have more than tripled this year, helped by the 25-year link-up with Morrisons. Announced in May, it will see the supermarket invest £46 million in Ocado’s Dordon distribution centre in the Midlands  as well as making an initial payment to the online grocer of £170 million.

Although this has not gone down well with Ocado’s original partner Waitrose, which can break its existing deal in 2017, experts now believe the group is well positioned to export its technology across the globe. Responding to rumours that a suitor such as Amazon could make a bid for Ocado, Steiner said: “Our stock price has moved and people are looking for the elephant in the room — but I can tell you there has been no take-over approach.”

News of the tie-up talks came as Ocado revealed it had slipped into the red during the first half of the year, posting a £3.8 million loss compared to a £200,000 profit in 2012. Steiner said the figure had been impacted by £2.8  million of one-off costs, including £1.3 million in fees from the Morrisons deal and the rest from opening two new distribution centres. Revenues were up by 15.6% to £355.9 million.

“It’s not inevitable that Waitrose will break its deal with us,” Steiner  added. “In fact the deal with Morrisons will enable us to invest in our platforms to benefit all of our customers.”

Shares fell 6.6p to 305.6p after the update. Shore Capital’s Clive Black, one of Ocado’s harshest critics, maintained his sell rating but praised the recent appointment of ex-Marks & Spencer boss Sir Stuart Rose as chairman, “for the way he has engineered a seeming change in the group’s prospects”.