Ocado shares surge 45pc on news of US deal

Shares in Ocado (LON: OCDO) soared almost 45 percent on Thursday, adding £1.6 billion to the value of the online grocer.

The company unveiled a deal to provide technology to the American grocery giant Kroger (NYSE: KR), the world’s third-largest retailer with annual sales of $122 billion (£90 billion).

“Ocado’s unique, proprietary and industry-leading technology is set to transform the shopping experience of consumers around the world,” said Tim Steiner, a founder and chief executive of the group.

“As we work through the terms of the services agreement with Kroger in the coming months, we will be preparing the business for a transformative relationship which will reshape the food retailing industry in the US in the years to come.”

Kroger will take a five percent stake in Ocado under the terms of the deal. 

Shares in the online grocer started the day worth 552p. At one point they rose 81 percent to 995p, but slipped back down and ended the day worth 797p.

At the current price, the group will be present in the FTSE 100, which will have a quarterly shuffle at the end of May.

“Ocado is making great strides in the global grocery market and inflicting serious financial pain on those who have bet against it,” said Laith Khalaf, a senior analyst at Hargreaves Lansdown.

“The company is known in the UK as an online supermarket but that’s just the tip of the iceberg as Ocado is primarily a technology and logistics firm with the potential to license out its services to grocers around the world.

“The short sellers were hoping Ocado wouldn’t deliver on its international expansion plans. That position now looks like a badly busted flush.”

In 2018 Ocado has also made a deal to share its technology with Sweden’s ICA Group. It also operates the online business of Morrisons (LON: MRW).