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Ocado Signs Master Services Agreement With Kroger For CFCs

British online supermarket Ocado Group Plc. (OCDO.L) announced Tuesday that it has signed Master Services Agreement with U.S. retailing company Kroger Co. (KR).

The companies have signed service and operational terms including how Kroger will order Customer Fulfilment Centres or CFCs and the basis on which Ocado will now develop and operate those sites. This is the future services agreement referred to in the announcement made in May.

Under the terms of the agreement, Kroger is expected to order 20 CFCs over the first three years of the agreement, and order the first three CFCs by the end of 2018. The terms and fee structure are similar to those for other transactions to-date combining up-front fees and ongoing capacity fees.

Ocado has agreed to install and maintain modules of Mechanical Handling Equipment or MHE sufficient to provide an agreed level of throughput. The target is for Kroger's CFCs to go live within approximately two years of each order being placed.

In order to expedite the opening of CFCs in the US, the first CFCs ordered in 2018 will have funding requirements similar to earlier deals.

Ocado expects the earnings impact of the Master Services Agreement to be neutral in FY18.

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