Shares of the Ocado Group soared on hopes it would benefit from a merger of the two biggest supermarkets in the US. News of the Kroger-Albertson deal continues to push the stock market.

Ocado shares were up 10.9 per cent. Shares of Ocado continued to rally as much as 12% on Friday, after Thursday’s gains.

According to a Bloomberg report, Ocado’s equity also experienced a boom. The company’s £500 million of convertible bonds due to mature in 2025 also gained. However, they still remain within “distressed” territory, when prices drop below 80 cents on the dollar.

 Kroger Co. announced it would acquire its rival Albertsons to create a mega grocery giant. And it is impacting Ocado shares with the very real possibility that it means an increase in the number of automated warehouses in the U.S.

“The bull case here would be that Ocado’s exclusive relationship with Kroger could enable Ocado’s customer fulfillment centers to service the volumes from Albertsons in the future,” market analyst Luke Holbrook noted.

Ocado online shopping technology

Ocado Group is a British enterprise with a 50% share of Ocado.com. And 50% is owned by another UK retailer Marks & Spencer. 

The supermarket-turned-technology business is currently suppling automated warehousing technology to Kroger branded grocery stores.

In 2018, Kroger struck a deal with the British technology company to build out robot-powered centers to pick-and-pack online grocery orders.

The Ocado Smart Platform (OSP) also known as The Hive enables multiple shopping channels including web-shop, mobile apps and voice ordering.

Kroger is the largest user of the automated warehouse technology, which picks and packs grocery online orders ready for delivery. 

The business model is breaking into new markets. And Kroger plans to expand throughout other parts of the country. Kroger has contracted to build as many as 20 automated grocery warehouses in the US.