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Waitrose fears conflict of interest in Ocado/Morrisons deal Waitrose fears conflict of interest in Ocado/Morrisons deal
(5 months later)
Waitrose bosses have asked for legal advice about online grocer Ocado's discussions with their supermarket rival Morrisons and believe a conflict of interest is inevitable if a deal is reached.Waitrose bosses have asked for legal advice about online grocer Ocado's discussions with their supermarket rival Morrisons and believe a conflict of interest is inevitable if a deal is reached.
The row came as Ocado suffered a protest vote by shareholders, with nearly one in four voting against the pay packages for the board – including a 30% salary rise for chief executive Tim Steiner. A further 14% voted against a controversial new long term bonus scheme. The vote took place at Ocado's annual meeting, which was closed to the media.The row came as Ocado suffered a protest vote by shareholders, with nearly one in four voting against the pay packages for the board – including a 30% salary rise for chief executive Tim Steiner. A further 14% voted against a controversial new long term bonus scheme. The vote took place at Ocado's annual meeting, which was closed to the media.
Lawyers at the John Lewis Partnership, which owns Waitrose, are understood to be combing through the exclusive grocery supply contract between Waitrose and Ocado. Insiders say a deal to help Morrisons launch its own website could cost Ocado up to £40m for breach of contract.Lawyers at the John Lewis Partnership, which owns Waitrose, are understood to be combing through the exclusive grocery supply contract between Waitrose and Ocado. Insiders say a deal to help Morrisons launch its own website could cost Ocado up to £40m for breach of contract.
A source said: "Waitrose has been by Ocado's side since the beginning. It provided seed funding and has its name on Ocado's vans, but now they are in discussions with a rival. The sole relationship should be with Waitrose."A source said: "Waitrose has been by Ocado's side since the beginning. It provided seed funding and has its name on Ocado's vans, but now they are in discussions with a rival. The sole relationship should be with Waitrose."
Steiner, speaking after the company's annual meeting, insisted there would be no conflict with any potential Morrisons deal.Steiner, speaking after the company's annual meeting, insisted there would be no conflict with any potential Morrisons deal.
He said: "The Ocado.com business will remain totally unchanged, sourcing its products from Waitrose/Ocado brand products. There are no concerns about a conflict of interest. None at all."He said: "The Ocado.com business will remain totally unchanged, sourcing its products from Waitrose/Ocado brand products. There are no concerns about a conflict of interest. None at all."
However, another source close to Waitrose, said: "Ocado have had little communication with Waitrose and bosses are frustrated because they don't know what kind of deal is being discussed with Morrisons and don't know what to expect."However, another source close to Waitrose, said: "Ocado have had little communication with Waitrose and bosses are frustrated because they don't know what kind of deal is being discussed with Morrisons and don't know what to expect."
It is understood that Ocado chairman Lord Grade has written to Waitrose and Steiner has spoken to the grocer's managing director Mark Price to reassure him there will be no conflict.It is understood that Ocado chairman Lord Grade has written to Waitrose and Steiner has spoken to the grocer's managing director Mark Price to reassure him there will be no conflict.
All discussions between Morrisons and Ocado over the UK's fourth-largest supermarket buying software to set up its own groceries delivery service have been held behind closed doors – and it is understood that no information has been shared with Waitrose. Morrisons has pledged to launch its online service by January next year.All discussions between Morrisons and Ocado over the UK's fourth-largest supermarket buying software to set up its own groceries delivery service have been held behind closed doors – and it is understood that no information has been shared with Waitrose. Morrisons has pledged to launch its online service by January next year.
The first source said: "Ocado may say that there is no conflict, but there will no doubt be a difference in interpretation if any deal arrives."The first source said: "Ocado may say that there is no conflict, but there will no doubt be a difference in interpretation if any deal arrives."
Waitrose helped Ocado launch in 2001 with a cash injection of £46m to build the company's distribution hub in Hertfordshire, leaving it with a 40% stake in the business, which was sold in 2011. A 10-year supply contract is in place until 2020, with a break clause in 2017.Waitrose helped Ocado launch in 2001 with a cash injection of £46m to build the company's distribution hub in Hertfordshire, leaving it with a 40% stake in the business, which was sold in 2011. A 10-year supply contract is in place until 2020, with a break clause in 2017.
At Ocado's annual meeting shareholders protested at Steiner's basic pay rising from £350,000 to £450,000. Some 23.5% of shareholders voted against the remuneration report and 13.6% voted against a new long-term-incentive bonus plan after Ocado declined to reveal the targets that will trigger payouts.At Ocado's annual meeting shareholders protested at Steiner's basic pay rising from £350,000 to £450,000. Some 23.5% of shareholders voted against the remuneration report and 13.6% voted against a new long-term-incentive bonus plan after Ocado declined to reveal the targets that will trigger payouts.
Grade said: "Lots of companies don't disclose their targets. It's very commercially sensitive. It is for the next chairman to decide when the shares have vested whether retrospectively it will want to publish the targets and that's a matter for the board in the future.Grade said: "Lots of companies don't disclose their targets. It's very commercially sensitive. It is for the next chairman to decide when the shares have vested whether retrospectively it will want to publish the targets and that's a matter for the board in the future.
"Believe you me, if there wasn't a very good reason we would disclose the targets. If it was in the best interests of the company to disclose them we would. It is definitely not in the best interests of the company to disclose the targets. If shareholders don't like it they can sell their shares.""Believe you me, if there wasn't a very good reason we would disclose the targets. If it was in the best interests of the company to disclose them we would. It is definitely not in the best interests of the company to disclose the targets. If shareholders don't like it they can sell their shares."
He said 70% of the share register had held detailed consultations with the board on the incentive scheme. More than 27% of the shares are owned by former or current board members, including Steiner, who has a stake worth £64.6m.He said 70% of the share register had held detailed consultations with the board on the incentive scheme. More than 27% of the shares are owned by former or current board members, including Steiner, who has a stake worth £64.6m.
On banning journalists from attending the meeting, Grade said it was a policy he had followed for many years.On banning journalists from attending the meeting, Grade said it was a policy he had followed for many years.
"I never invite the press to AGMs. AGMs are meetings that are run for shareholders, in my view. The press are not invited at Pinewood where I'm chairman and they are not invited here. I think the presence of the press at an AGM can inhibit debate and discussion and it is not appropriate.""I never invite the press to AGMs. AGMs are meetings that are run for shareholders, in my view. The press are not invited at Pinewood where I'm chairman and they are not invited here. I think the presence of the press at an AGM can inhibit debate and discussion and it is not appropriate."
Grade also suggested that Ocado could have other tie-ups, similar to the proposed Morrisons deal, with other retailers.Grade also suggested that Ocado could have other tie-ups, similar to the proposed Morrisons deal, with other retailers.
"The intellectual property of the business, we believe, is going to be very, very valuable and how we exploit that in the future domestically and internationally is very much a matter for the board in due course.""The intellectual property of the business, we believe, is going to be very, very valuable and how we exploit that in the future domestically and internationally is very much a matter for the board in due course."
Waitrose declined to comment.Waitrose declined to comment.
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