M&S's £750m Ocado deal is overpricedTo fund the Ocado deal M&S aims to raise £601.3m via a rights issue at 185p per ordinary share, a discount of 31.8 per cent to the previous day's closing price. Richard Hunter, head of markets at Interactive Investor, said: “It remains to be seen whether the high price, which will be largely funded by a £601m rights issue, is justified but there is little doubt that there is much potential for the tie-up if executed correctly.” City Index market analyst Fiona Cincotta said the discount on the rights issue could raise concerns that the Ocado JV is overpriced. “The company's uncertain future is reflected in the eye-watering deep discount that has been applied to the capital raising,” she said. Read more: M&S buying growth with Ocado? "The Ocado deal may well offer this increasingly irrelevant old retailer a new lease on life, but the size of the discount on the equity raising will only stoke concerns that M&S has paid too much.
"Investors will have to wait until the back end of next year to see if the deal can start bearing the requisite fruit." Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said the tie-up could lead to shoppers buying bigger bags of M&S goods. “M&S has lagged behind the bigger supermarkets in the online food space and this deal aims to turn that around. It’s a smart solution, as not many people tend to do a whole big shop with M&S, so by holding hands with Ocado, more of the group’s products will end up in the weekly online-shopping bags,” she said.