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Ocado shares soar as it lands major deal with Kroger to enter the U.S

Reuters  |  LONDON 

By Paul Sandle

LONDON (Reuters) - Britain's clinched a game-changing deal with as its exclusive partner in the U.S., securing its entry into the world's biggest market and sending its shares up 50 percent.

The agreement, Kroger's response to the competitive threat posed by Amazon's purchase of Whole Foods, takes Ocado's home-delivery platform into the for the first time and marks the fourth major deal it has signed with supermarkets around the world in six months.

Ocado's said the partnership was "transformational".

"The scale of the proposed transaction, and therefore the quantum of its economics, is wholly different to those we've already signed," he told reporters on Thursday.

He said Kroger, which had sales of $122 billion in its last fiscal year, was the grocer best-positioned to succeed in the U.S. sector. It will now discontinue discussions with other U.S.-based retailers.

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

As part of the deal, will take a stake in the British company, equivalent to 5 percent of the existing share capital valued at 183 million pounds ($247.5 million), said.

"We think this is just about as positive a deal as could have been expected to have been announced by Ocado," analysts at said.

"The company now has an extremely credible partner in the largest grocery market in the world."

Ocado's technology automates the processing and packing of online grocery orders, using hundreds of robots in technologically advanced order fulfilment centres.

will identify at least 20 sites to build new, automated warehouse facilities in the United States, Tatton-Brown said, more than all of the facilities has built or is planning to build for all its other partnerships to date.

The two companies are working to identify the first three sites in 2018, the company said.

Tatton-Brown said the detailed financial terms still had to be agreed, but the deal was expected to be neutral in respect to earnings in the full-year 2018.

($1 = 0.7393 pounds)

(Reporting by Paul Sandle; editing by Kate Holton and Elaine Hardcastle)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, May 17 2018. 15:16 IST