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Kroger shares rose on Ocado deal amid busy week for M&A news

18 May 2018

Shares in Ocado (OCDO) have rocketed after the online supermarket signed a deal to become the exclusive partner of USA giant Kroger (KR.N).

The good news for OCDGF stock is that the company is now the exclusive grocery delivery service for Kroger in the U.S. As part of this agreement, KR is increasing its investment in the company by 5%.

If the Ocado partnership gives Kroger the confidence to bring delivery in-house, "that will be disastrous for Instacart", said Neil Saunders, managing director of GlobalData Retail.

The technology of Ocado makes use of intelligent system which automates the processing and packing of online grocery orders, using hundreds of robots in technological advanced order fulfillment centers.

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Added Kroger SVP of Business Development Alex Tosolini: "We look forward to innovating together with Ocado to provide our customers the best possible online and in-store experience".

We see Ocado as an innovative, exciting and transformative partnership in pursuit of our Restock Kroger vision, to serve America through food inspiration and uplift.

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".

Earlier, jaws dropped as the United Kingdom online grocer signed a technology and fulfilment deal with America's largest chain of supermarkets; a company that generated US$122bn in revenues past year. Over the next three years, they will aim to find locations for 20 fulfilment warehouses.

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Ocado Group CEO Tim Steiner said: "Ocado's unique, proprietary and industry-leading technology is set to transform the shopping experience of consumers around the world". Just earlier this month, it signed a deal to build Swedish supermarket ICA's online grocery business, following tie-ups with Canadian grocer Sobeys and French supermarket operator Groupe Casino. Kroger is also in competition with Walmart and Target.

Ocado has always been considered a weak link in the supermarket sector by some analysts who brand it grossly overvalued.

Luke Jensen, CEO of Ocado Solutions, told the media on Thursday that getting into the USA market would prove a tremendous opportunity as Americans warmed to the idea of online deliveries.

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Kroger shares rose on Ocado deal amid busy week for M&A news