M&S seeks to persuade investors of Ocado deal benefits
Marks & Spencer today insisted its £750m joint venture with Ocado would boost profits as it aimed to persuade uncertain investors on the benefits of the deal.
The high street giant is aiming to double the size of its food business and said the tie-up with the delivery service would set it “well on the way to doing that”.
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Chairman Archie Norman said the deal would allow M&S to secure a seven to eight per cent improvement in terms from its suppliers of branded products.
“No one expected us to buy half of Ocado…and a lot of people can’t really understand why we did,” Norman said at the M&S annual general meeting (AGM) in Wembley today.
He added: “This is the world’s leading food home delivery business, there is nothing quite like it anywhere in the world.”
Shares in M&S dropped as much as 12 per cent when the tie up was announced in February after the retailer confirmed plans to raise £600m through a rights issue and cut dividend payments.
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M&S will pay Ocado £562.5m in upfront cash before the end of the third quarter, with a deferred cash payment of £187.5m plus interest five years after completion.
At least a third of M&S’s business will be online after the venue kicks in, chief executive Steve Rowe said at the time of the announcement, as the retailer belatedly enters the internet food shopping market.