Small cap stars buoyed by Ocado's surge on United States deal

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LONDON/LOS ANGELES, May 17 (Reuters) - U.S. supermarket chain Kroger Co struck a deal with British online grocer Ocado to build and deliver from robot-staffed warehouses, upping the ante in Kroger's battle with Amazon.com Inc and sending Ocado shares rocketing.

Kroger and online supermarket operator Ocado have formed an exclusive partnership agreement in the USA that will accelerate Kroger's e-commerce shopping platform.

Kroger notes that it isn't expecting the deal with Ocado to affect its earnings for the full year of 2018.

"We are actively creating a seamless digital experience for our customers", Kroger CEO Rodney McMullen said in a statement.

Kroger is one of the world's largest grocers, with sales reaching $122bn in 2017.

"Ocado's unique, proprietary and industry-leading technology is set to transform the shopping experience of consumers around the world", he said.

The deal is the latest in a series of tie-ups announced by Ocado recently.

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Kroger, which is increasing its stake in Ocado to a total of more than 6%, hailed the Ocado deal as "innovative, exciting and transformative".

Ocado chief executive Tim Steiner said working with Kroger to transform the way in which U.S. customers bought groceries represented "a huge opportunity to redefine the grocery experience" for Kroger customers. Over the first three years of the agreement they are to identify a further 20 sites.

This isn't the first such deal for Ocado, which has licensed out its technology to grocery companies in France, Canada and Sweden.

Bearish hedgies ate humble pie, with those shorting Ocado registering as much as a £282m paper loss at one point in the day, before shares eased back. More than 56 million Ocado shares were on loan on Tuesday, the most recent data from industry tracker FIS' Astec Analytics showed.

Shares in the group, which listed in 2010, jumped over 50 percent in early Thursday to trade at a record high.

It took a mega deal with a United States grocer for Ocado to prove that it's no basket case.

Added Kroger SVP of Business Development Alex Tosolini: "We look forward to innovating together with Ocado to provide our customers the best possible online and in-store experience".

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