Ocado shares fall over fears Waitrose to pull plug

Stuart Rose is facing a fight with City investors after shares in Ocado tumbled last night on fears that Waitrose will pull the plug on its tie-up with the firm.
Sir Stuart RoseSir Stuart Rose
Sir Stuart Rose

Over the weekend Mark Price, chief executive of Waitrose, dropped a bombshell by saying his lawyers will scrutinise any deal between Morrisons and Ocado to see if there is any breach of Ocado’s existing contract with Waitrose.

Morrisons is in talks with Ocado about the possibility of doing some sort of deal to enable the Bradford-based supermarket chain to launch an online service next year.

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Analysts at Shore Capital said: “We believe that Ocado is ‘playing with fire’ in speaking to another British supermarket group, as it tries to utilise its substantially greater fulfilment capacity, because the group’s umbilical cord to Waitrose may be cut sooner than we anticipated and Ocado cannot exist as a commercial entity without Waitrose in our view.

“Whilst Ocado states that any agreement with Morrisons would not be a conflict with Waitrose, we see the mood of Mr Price and co as being deadly serious. As such, Ocado may have irreparably polluted a commercial relationship upon which it is dependent and it must lead to a greater chance of a break in 2017 in our view.”

Ocado’s shares fell 14.6p, a fall of 6.5 per cent to 210p.

One industry source said: “Ocado and Morrisons are smart operators. You would reckon they were legally savvy enough not to put together an agreement that would directly cut across contractual agreements Ocado already has.”

Mr Price said lawyers would seek to examine any tie-up between Ocado and Morrisons and it is now ramping up its own online service.

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Ocado is closely linked with Waitrose, exclusively delivering the supermarket’s products – as well as its own and those of branded ranges – to its customers. But earlier this year it was announced that it was in talks with Morrisons about a deal to use its expertise to help the supermarket set up its own online business in the UK.

Last week both companies confirmed that the discussions were ongoing.