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

Kroger shares closed higher on news it has struck a deal to use Ocado's online shopping tech in the US.

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

Kroger shares closed higher Thursday as the US grocer announced it has agreed an exclusive deal with UK grocer Ocado, to use its online shopping tech in the US. Kroger will also take a 5% stake in Ocado. The deal helped lift both sets of shares, with Ocado benefitting the most.

Kroger shares ended the US Thursday trading session 1.44% higher at $26.30. Ocado shares, meanwhile, gained 44% Thursday and are a little in the green Friday.

Kroger gains online shopping tech

Kroger has struck the deal to help accelerate its online shopping capabilities. That's something that US grocers are increasingly looking to in the wake of Amazon’s 2017 Whole Foods purchase.

Ocado is an online only grocer in the UK and has well developed tech to ensure its success without a physical store presence.

“We are actively creating a seamless digital experience for our customers. Our partnership with Ocado will speed up our efforts to redefine the food and grocery customer experience – creating value for customers and shareholders alike,” said Kroger chairman and CEO, Rodney McMullen.

Ocado was also upbeat on the deal and its own abilities.

“Ocado's unique, proprietary and industry-leading technology is set to transform the shopping experience of consumers around the world,” Ocado Group CEO Tim Steiner, said.

“The opportunity to partner with Kroger to transform the way in which US customers buy grocery represents a huge opportunity to redefine the grocery experience of Kroger's customers and create value for the stakeholders of both Kroger and Ocado,” Steiner added.

New plans under discussion

As the terms of the agreement are under discussion, Kroger and Ocado are already planning where in the US the first three sites for new automated warehouse facilities will be. Kroger said up to 20 new sites will be identified in the first three years of the agreement.

"We look forward to innovating together with Ocado to provide our customers the best possible online and in store experience," said Alex Tosolini, senior vice president of Kroger business development.

The deal is not expected to affect Kroger’s EPS guidance for 2018 or 2019.

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