The boss of Marks & Spencer has defended the decision to spend £750m on a food delivery tie-up with Ocado, the online grocer, in a deal that it will fund by slashing its dividend and asking its shareholders for cash.
Shares in M&S tumbled by 37.75p, or 12.5 per cent, to 265.5p after the company said that it planned to raise as much as £600m through a rights issue and to cut its dividend by 40% to pay for a 50% stake in Ocado’s UK retail division, which is valued at £1.5bn by the deal.
M&S, led by Steve Rowe, lacks a grocery delivery business and it is seeking to make a late move into the market by kick-starting a service through the tie-up, which will mean that Ocado stops selling Waitrose groceries by September 2020.
The deal forms part of Rowe’s plan to revive the 135-year-old retailer’s fortunes as it struggles with the decline in high streets as consumers shop online and grapples with the growth of rival fast-fashion brands.
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