Wm Morrison Supermarkets Plc. (MRW.L) Friday announced a long term agreement with Ocado Group Plc. (OCDO.L) that would enable Morrisons.com to commence grocery deliveries to customers by January 2014.
The agreement will comprise a technology and services arrangement and a sale and leaseback of property and equipment at Dordon. Morrisons will make an initial capital payment of up to 170 million pounds to Ocado to acquire Dordon and associated mechanical handling equipment, as well as a licence and integration fee.
Another 46 million pounds will be invested to expand Dordon to accommodate Morrisons range, integrate with Morrisons systems and establish a network of delivery spokes. On an annual basis, Morrisons will pay service costs and a contribution to R&D expenditure.
Ocado will receive a share of the positive Earnings Before Interest and Tax, or EBIT, of Morrisons.com.
The food.com business is estimated to generate positive EBITDA in 2016/17 and a positive EBIT in 2017/18. Capital expenditure guidance is increased by 100 million pounds to 1.2 billion pounds to reflect additional investment in the Morrisons.com business. Full year debt guidance is increased to 2.7 billion.
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