LONDON (Reuters) - French supermarket Groupe Casino (CASP.PA) has agreed to use British online retailer Ocado’s e-commerce platform to expand its business, driving Ocado (OCDO.L) shares as much as 25 percent higher.
Partnerships with international retailers are central to the growth prospects of Ocado, whose own branded online grocery service has only a 1.3 percent market share in Britain.
Ocado’s shares jumped to their highest level since the company signed a separate deal with another unnamed retailer in June. They were trading up almost 21 percent at 1145 GMT, valuing the group at over 1.9 billion pounds.
The latest deal gives Casino exclusive rights to use Ocado’s robotics, online technology and delivery software in France.
“We expect this deal to be one of many successful collaborations with leading retailers the world over,” Ocado Chief Executive Tim Steiner said.
Amazon’s expansion into the grocery business has fueled concerns about intense competition in the sector.
Ocado and Casino will build a customer-fulfilment center (CFC) equipped with Ocado’s robotics and picking software to serve customers of the upmarket Monoprix brand in and around Paris and in the Normandy and Hauts de France regions.
“This agreement is a major leap in terms of quality: 50,000 food items will be offered in the first stage to customers in the Greater Paris area with precise and speedy delivery at home and through a platform which makes it achievable to do this profitably,” Casino Chief Executive Jean-Charles Naouri said.
Casino, which competes with Carrefour (CARR.PA), E.Leclerc and Auchan, has close to 13,000 stores in France, Latin America and the Indian Ocean region, although the Ocado tie-up only covers the French market.
Casino was trading up 2.1 percent at 49.2650 euros.
The online grocery market in France is focused on “Drive” or click and collect rather than direct home delivery, with the latter only accounting for 5 percent of online sales.
Analysts said Casino was betting on the online shopper in France adopting similar habits to Britain where online delivery vans are a common sight in towns and cities.
Steiner said the new fulfillment center, which will take about two years to become operational, would be bigger than Ocado’s equivalent in Andover, southern England, which is fully automated and can handle 70,000 orders a week.
Analysts at Bernstein said it was a great deal for Ocado, and there may be more in the pipeline.
“However, justifying the Ocado share price requires one big deal per year for the foreseeable future and we don’t believe there is sufficient deal potential for this,” they said.
Ocado said on Tuesday it expected the deal to create significant long-term value.
In its next financial year, which starts next week, it will be earnings neutral, with the costs of establishing the partnership offsetting the initial fees payable.
Ocado said it expected to incur additional capital expenditure of 15 million pounds ($20 million) next year, with further capex in future years.
($1 = 0.7506 pounds)
Editing by Kate Holton and Keith Weir