The shares in both Marks and Spencer (M&S) and Ocado have sharply risen after confirmation of the negotiations regarding a joint venture.
Both firms released statements to the City after the Evening Standard newspaper reported that a deal was imminent.
Ocado stated: “Following media speculation, Ocado Group plc confirms that it is in discussions with Marks and Spencer Group Plc regarding a joint venture in UK retail.”
It added: “There is no certainty that these discussions will result in any agreement or as to the timing of any such agreement.”
M&S’ announcement contained no additional details regarding the partnership. Its shares were initially up by 4 percent, ending the day slightly lower at 3.2 percent while those of the online food retailer was 10 percent higher as the clock ticked down to midday, closing up almost 12 percent.
Rumours regarding a deal, that would see M&S become the supply partner of Ocado, have been swirling since last month. It would give the high street retailer its first online food delivery outlet.
It has been placing greater importance on developing the food side of the business as it continues its attempts to revive its flagging fashion and homeware offerings.
The Standard reported that the pair had been working to secure an agreement by the 1st of March – a deadline for triggering an 18-month break clause between Ocado and Waitrose, its current supply partner.
The paper said that M&S would effectively be paying to take control of the customer base of Ocado of over 700,000 households, leaving Ocado free to concentrate on the licensing of its robot-driven warehouse technology.
The chief market analyst at ThinkMarkets, Naeem Aslam, stated: “M&S joining forces with Ocado is music to investors’ ears. The news could not have come at a better time.”
He added: “The products offered by M&S have always been loved by its customers and M&S has a specific kind of clients who are not massively sensitive to price.”
He continued: “They need quality products and M&S has that. It was lacking a reliable delivery source, and now with Ocado on its belt, this will improve the revenue.”
He noted: “There is just huge potential for synergy and investors are paying attention to this.”