Hobson: Ocado Comes Out Best From M&S Deal

THE WEEK: Morningstar columnist Rodney Hobson looks at the pros and cons of the Marks & Spencer-Ocado joint venture from both sides

Rodney Hobson 1 March, 2019 | 8:55AM
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Ocado Marks & Spencer

As a general rule, when one company bids for all or part of another one it is shareholders of the target company who come out better. So it has proved with the plan for Marks & Spencer (MKS) to take a half share in the UK retail division of Ocado (OCDO), which will deliver M&S food to customers’ homes.

The deal, in principle, makes sense for both sides. Ocado was originally the inhouse delivery service for Waitrose but it has already added food and non-food items from supermarket Morrisons to its deliveries and each new partner potentially adds value and produces economies of scale. In any case, its contract with Waitrose expires in September next year and there is no guarantee that it will be renewed. It makes sense to act sooner rather than later.

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About Author

Rodney Hobson

Rodney Hobson  is a columnist for Morningstar.co.uk and author of several investing books, including The Dividend Investor and How to Build a Share Portfolio.