Marks and Spencer agrees deal with Ocado to sell food online

UK retailer Marks and Spencer on Wednesday announced a deal with online supermarket Ocado to deliver M&S food direct to homes, as customers increasingly move to internet shopping.

M&S, which already sells its clothing online and is shutting stores, is buying 50 percent of Ocado's UK retail business for up to 750 million pounds ($994 million, 874 million euros), the two companies said in statements to the London Stock Exchange. The joint venture will be known as Ocado.com.

M&S branded food products will be sold online by September 2020 following the termination of Ocado's current such deal with UK supermarket group Waitrose.

"I have always believed that M&S food could and should be online," Marks and Spencer chief executive Steve Rowe said on Wednesday.

"Combining the strength of our food offer with leading online and delivery capability is a compelling proposition to drive long-term growth." Ocado said the 50/50 joint venture would "transform online grocery shopping in the UK".

It added: "The grocery retail sector is undergoing significant and rapid change as customer expectations evolve and as spending shifts online." Marks and Spencer is meanwhile in the process of shutting more than 100 stores by 2022.

In morning deals, shares in M&S slumped 9.5 percent to 274.30 pence on London's benchmark FTSE 100 index after the company said it would slash its dividend. It added that it would raise up to 600 million pounds from a rights issue to help fund the Ocado deal.

Ocado shares jumped 4.8 percent to 1,038 pence, topping the FTSE 100, which was down 0.9 percent overall at 7,087.20 points.

"For Ocado, the deal is going to replenish it with fresh funds to continue to invest in distribution centres, to fulfil the international partnerships it has signed in recent years," noted Laith Khalaf, senior analyst at stockbroker Hargreaves Lansdown.

In a separate statement, Waitrose said it was ending a long association with Ocado having strengthened Waitrose's own online business.

Ocado hit the news earlier this month when its share price tumbled after a fire ripped through a company warehouse operated by robots.

The Andover facility in southern England is designed to handle up to 1,100 robots, or moving containers collecting orders for its solely online customers. No staff or members of the public were injured as a result of the blaze.