Ocado's Major Kroger Deal May Open Up M&A Potential: Street Wrap
- U.K. grocer jumps as much as 51% to record after Kroger pact
- Deal may open up ‘long-term M&A optionality,’ Berenberg says
Kroger Partners With U.K.'s Ocado
Ocado Group Plc’s agreement to license its home-delivery technology to U.S. supermarket chain Kroger Co. is the online grocer’s biggest deal so far, and a “materially larger” pact than Bernstein’s expectations. Kroger taking a 5 percent stake in Ocado may also pave the way for M&A options in the future, according to Berenberg.
The shares soared as much as 51 percent to a record high, adding about 1.8 billion pounds ($2.4 billion) to the market value and making the company a potential candidate for inclusion in the FTSE 100. Ocado has long been a target for short sellers, although bearish bets have been tapering since the U.K. company clinched a technology licensing deal with French supermarket operator Casino Guichard Perrachon SA in November. Short interest was at 9.9 percent of shares outstanding on May 15, down from a record high of 23.5 percent in March 2016, according to IHS Markit data.