Ocado surges on Amazon bid speculation

Ocado surged on Thursday amid speculation it could be a takeover target for Amazon.

According to The Times, there has been talk the London-listed online supermarket is being eyed up by technology heavyweights such as Amazon. It was understood that Amazon could be looking at an 800p-a-share takeover bid, with Goldman Sachs and JP Morgan acting for the bidders.

At 1230 BST, the shares were up 31% at 564.20.

Victoria Scholar, head of investment at Interactive Investor, said: "Ocado has fallen out of favour with investors lately, trading down 40% over the past 12 months even after today’s jump, attracting potential opportunistic interest from parties looking to pounce on its depressed share price.

"It was a stay-at-home stock market winner during the pandemic with shares surging in 2020, however the economic reopening ever since has prompted a downward trendline to emerge with many investors unwinding their holdings.

"In February its full-year losses mushroomed to $604 million, below analysts’ expectations, despite its joint venture with Marks and Spencer and its US partnership with Kroger as cost-of-living pressures on the consumer as well as elevated cost inflation and expensive energy bills take their toll."

Danni Hewson, head of financial analysis at AJ Bell, said: "The shares have been about as flat as an open bottle of lemonade since the pandemic but third parties, including reportedly Amazon, may still see value in the brand, technology and infrastructure.

"Ocado’s hopes of becoming an online groceries partner to businesses across the globe has only had limited success and shareholders may be open to a bidder putting them out of their misery."

Orwa Mohamad, analyst at Third Bridge, said: "Amazon and Ocado are somewhat of a natural fit from a fulfilment point of view. One thing Amazon suffered from in the US with Whole Foods acquisition is integrating the supply chain. With Ocado, they don’t have to do everything from scratch as it’s a modern and compatible supply chain and fulfilment process.

"Such a move will get Amazon Fresh into more households, and that’s a very important thing. However, a physical takeover of some sort may still be required to achieve real organic growth."