Will they? Or won’t they? In recent months, speculation has been rife surrounding Jeff Bezos’s fevered pursuit of Ocado.
The online supermarket’s market valuation initially surged when The Times first broke news of a possible Amazon offer. As the BBC reported at the time, shares in the firm were “up more than 40% at one point.”
Now, with rumours of the Seattle retail behemoth’s interest cooling, the share price has headed in the opposite direction.
But have the markets and analysts got it right? If the deal reignites, should Ocado sell to Bezos?
Admittedly, few businesses demure when Amazon comes a-courting. However, whatever the deal’s current state of play, there may be solid grounds for Tim Steiner, Ocado’s CEO, delivering a firm ‘no’ to Mr Bezos’s practised techniques of seduction.
Because, as the Guardian points out, “if you are a true believer in the online grocery revolution, now would be a terrible moment to sell .”
Yes, from Amazon’s point of view, the acquisition seems to make sense.
“Amazon could benefit from Ocado’s robot picking grid technology, used not just within its own retail operations but also by major supermarkets such as Kroger in the US,” says The Grocer. And the magazine continues, “While optimised for picking groceries, the tech can readily be adapted to pick any small items – ideal for many of the products sold on Amazon.”
There is also a clear synergy between Ocado and the Whole Foods supermarket chain, which Amazon already owns.
“One thing Amazon suffered from in the US with the Whole Foods acquisition is integrating with the supply chain,” Orwa Mohamed, an analyst at Third Bridge, told Proactiveinvestors.co.uk.
“With Ocado, they don’t have to do everything from scratch as it’s a modern and compatible supply chain and fulfilment process.”
So, for Amazon, the deal still stacks up. But, from Ocado’s side of the bargain, things look a little different.
Founded in 2000, by three Goldman Sachs bankers, and heralded as the future of supermarket shopping when it launched, Ocado has certainly taken a long time to grasp that opportunity.
But it now has one million active users. A key strategic partnership with Marks & Spencer, 12% of the UK market. And a tried and tested business model ready to be replicated around the world.
The Guardian again, “Ocado has built 23 warehouses, more than half outside the UK; another 64 are committed; and, beyond the original UK retail business (now a joint venture with Marks & Spencer), there are 10 international partners. Last year’s fundraising was meant to be the last, with positive cashflow of £550m promised for some time around 2027.”
In other words, just as your goose is about to deliver its first golden egg, is that really the right time to sell it to the biggest farmer in town?
Will Ocado? Or won’t they? Only time will tell.