USA deal sees Ocado deliver for backers

London Stock Exchange

GETTYThe FTSE closed on it highest ever level

As part of a newly inked alliance, Kroger (KR) is harvesting the ordering, fulfillment and home delivery capabilities of United Kingdom -based online grocer Ocado, ramping up its arsenal against grocery rivals Walmart (WMT) and Amazon (AMZN).

The opportunity to partner with Kroger to transform the way in which US customers buy grocery represents a huge opportunity to redefine the grocery experience of Kroger's customers and create value for the stakeholders of both Kroger and Ocado. Within the terms of the agreement, Kroger will also acquire a 5 percent stake in Ocado. The Kroger partnership represents the fourth agreement Ocado has made during the past six months, although this represents its first foray into the US market.

FTSE soars on Ocado US deal news
GETTYFTSE soars on Ocado US deal news

Ocado CEO Tim Steiner is confident that this deal, and others like it, will "transform the shopping experience of consumers around the world".

Ocado - which has its own branded online grocery business in the UK - has partnered with other retailers in the UK (Waitrose and Morrisons), France (Casino) Sweden (ICA) and Canada (Sobeys).

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The move arrives as Kroger has made a commitment to spend some savings that were generated by the corporate tax reform, on different digital initiatives. Over the next three years, they will aim to find locations for 20 fulfilment warehouses. More than 56 million Ocado shares were on loan on Tuesday, the most recent data from industry tracker FIS' Astec Analytics showed.

Rodney McMullen, Kroger's chief executive, said the partnership would the grocer "redefine the food and grocery customer experience - creating value for customers and shareholders alike". These warehouses truly can be game changers, with automated technology capable of picking 175 units per hour, according to Ocado's annual report, which is a massive step change versus in-store efficiencies.

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Shares in the group, which listed in 2010, jumped over 50 percent in early Thursday to trade at a record high.

The retailer's efforts to create a "seamless digital experience" for customers would speed up as a result, he added.

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The detailed financial terms have yet to be agreed, but Kroger could bring forward some of its payments under the deal, which would reduce Ocado's need for capital.

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