Shares in Ocado surge after company announces deal with French supermarket Groupe Casino

'This agreement is a major leap in terms of quality,' said Jean-Charles Naouri, chief executive of Groupe Casino

Tim Steiner, CEO of Ocado, said that he was 'delighted' with the deal

Shares in Ocado surged by more than 20 per cent on Tuesday after the online supermarket announced that it had struck a deal to cooperate with French retailer Groupe Casino.

Ocado said that it had sealed a deal with Casino for the latter to use its e-commerce platform to help bolster its online business.

As part of the deal, Casino will build a fulfilment centre using Ocado’s mechanical handling equipment. The plant will serve the greater Paris area, the Normandie and Hauts de France Regions.

The construction and launch is expected to take at least two years.

Ocado will take care of maintenance and provision of technology within the centre. In return, Casino will pay Ocado upfront fees after signing the deal, and during the development phase. It will then pay ongoing fees linked to the use of the fulfilment centre.

“This agreement is a major leap in terms of quality,” said Jean-Charles Naouri, chief executive of Groupe Casino.

He said that the agreement would strengthen the quality of service available to its customers.

Tim Steiner, CEO of Ocado, said that he was “delighted” with the deal.

"We continue to make investments to commercialise our proprietary platform and expect this deal to be one of many successful collaborations with leading retailers to use it the world over."

Ocado also said that it expects the deal to “create significant long term value to the business”.

Analysts have for some time said that international collaboration is crucial to Ocado’s ongoing success and on Tuesday ETX Capital senior market analyst Neil Wilson said that investors “should be relatively hopeful that this is just the start of a number of new deals around Europe”.

He also cautioned however, that shareholders should watch “just how much the technology investment eats up earnings and whether these deals increase the cash burn.”