Deutsche Bank has said Marks & Spencer could take over Ocado’s retail business in four years
The investment bank says Marks & Spencer could acquire Ocado’s retail business in four years.
High Street Stalwart bought 50 percent of Ocado’s UK online shopping arm in 2019 for £ 750m, allowing customers to buy M&S products through the Ocado website.
Driving Force: Marks & Spencer bought 50 percent of Ocado’s UK online shopping arm in 2019 for £ 750m
But Deutsche Bank said M&S should try to buy the remaining 50 percent of Ocado. ‘We think it makes strategic sense,’ said Adam Cochrane at Deutsche Bank Research. He said such a move would provide a ‘big step’ for M&S’s strategy to expand its online operations and could hit a buyout in 2025 or earlier.
While the cost is not yet clear, Cochrane said its £ 750m M&S stake was ‘a starting point’. M&S declined to comment.
Deutsche claims that M&S is no longer “harming” money on its ‘sustainable dividend’, which was canceled last year to focus on improving business. ‘In our view, M&S needs to build firepower, which allows it to contribute to the rest of Ocado [retail business], ‘The bank added.
In charge: M&S chief executive Steve Rowe
M&S shares rose 2 per cent, or 4.6p, to 240.8p on the back of the note, while Ocado jumped 6.8 per cent, or 121.5p, to 1897.5p. Clive Black, an analyst with broker Shore Capital, said some Ocado-branded merchandise could be a valuable addition to the M&S line.
The joint venture with Ocado is a boon to M&S, which raised £ 28m per group from six months to 2 October as shoppers continued to buy online. It is part of a broader diversion strategy led by President Archie Norman and chief executive Steve Rowe, who have used the epidemic to accelerate overhaul.
Ocado is focused on its technology arm, which develops robots to select and sort groceries faster and cheaper than people.