Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The boss of Ocado intends to retain the group’s stake in its online joint venture with Marks and Spencer after the deal’s five-year anniversary, which would allow either side to sell their shares to the other.
“I don’t want to sell the other half right now, so whether [M&S] want it or not is not massively relevant,” said chief executive Tim Steiner in an interview with the Financial Times.
In 2019, M&S struck a £750mn deal for 50 per cent of Ocado Retail, which owns Ocado.com, as it sought to sell more food online.
Steiner’s comments come ahead of August, five years after the completion of the deal when both businesses will have the option to sell their shares in Ocado Retail to the other, subject to certain conditions. However, there is no automatic requirement for either company to sell, said a person familiar with the transaction.
Analysts and investors have been closely watching the tie-up between the two companies, especially after M&S repeatedly expressed dissatisfaction about Ocado Retail’s performance.
At its annual meeting this month, M&S said that Ocado Retail’s profitability “was clearly not where we want it to be” but said it was committed to the turnaround strategy implemented by the joint venture’s chief executive.
“It’s all symmetrical in terms of rights and obligations on each side, but right now we’re super happy owning half of it,” Steiner told the FT. “It’s performing well at the moment, it’s really coming back . . . We’re really excited about its future and expect it to increase profitability over time.”
In recent years, Ocado Group has focused on selling the software and automated warehouses that power Ocado.com to other leading grocers around the world to help them bolster their ecommerce operations.
Ocado Group raised its profit forecasts for its key technology division this month having suffered a series of blows, including a decision by US supermarket chain Kroger to close three sites powered by its technology.
Ocado.com, which accounts for 1.8 per cent of the total UK grocery market, was the fastest growing among its rivals for the fifth consecutive month, with sales up 10.7 per cent over the 12 weeks to July 7, according to data firm Kantar.
He added that the right ownership structure of the joint venture for Ocado Group was unclear. “Is the right model that [Ocado Group] continues to own part of it, M&S owns part of it, maybe some part of it is listed or something like that in the future?”
M&S declined to comment.
Ocado and M&S remain locked in negotiations over a final payment tied to their online joint venture, with the former in February raising the prospect of taking legal action for the first time.
Both companies have since said that they are hopeful they will resolve the disagreement amicably and insist the discussions are not affecting the day-to-day running of the business.
Steiner said: “At some point in the future, when we’ve got multiple cases of [others] using our technology, it may be less important for it to be owned by the same entity. Speaking as a shareholder, I would still like to own a piece of it.”
