marks and spencer will soon allow for online shopping
Marks and Spencer is to launch a £600m cash call on its shareholders in order to bring its ready meals and other food hall favourits to internet shoppers for the first time is a £1.5bn deal with the online dilivery firm Ocado.
M&S will pay Ocado £750m for a 50% share in the new Ocado.com joint-venture, which will begin trading in September 2020, when Ocado's deal to supply Waitrose products expires.
Steve Rowe, Marks And Spencer's chief executive said he had "always believed that M&S food could and should be online" and combining M&S's upmarket food range wiht Ocado's technology and delivery network was a "win-win" deal that would "drive long-term growth".
However, M&S shares fell by 12% as investors and annalists raised concerns that the 134 year old high street retailer had overpaid for access to Ocado's technology and delivery network. The plunge in M&S's share price-the biggest one day fall since 2016-wiped out more that £550m off the retailer's market value. Ocado's shares rose by 3%.
Rowe rejected suggestions that M&S had paid too much to get into the growing internet grocery business. "We think we're paying a fair price and I think Ocado do too," he told reporters on Wednesday.
Tim Steiner, the founder and chief executive of Ocado, said: “I think Steve and his team have taken an incredibly smart risk today. It’s not like going to a casino and laying down a chip. You’ve got to take calculated risks where your upside is enormous, your downside is minimal and your investment to do it is sensible.”
Rowe said he had expected M&S shares to fall as the company announced a £600m rights issue – together with a surprise 40% cut in its dividend payout – in order to fund the deal. “This is not about the short term,” he said. “This is about the transformation of Marks & Spencer [and] the transformation of online grocery shopping in the UK.”