Marks and Spencer will acquire 50 per cent of Ocado's UK retail business for up to £750 million.
The joint venture will trade as Ocado.com but will sell M&S branded products and benefit from access to the retailer's database of 12 million food shoppers.
It looks to spell the end of Ocado's long-running partnership with Waitrose, which had been coming up for renewal this week.
Following the termination of the agreement, it is expected that the new venture will be able to launch by September 2020 at the latest.
M&S is to issue new shares in a bid to raise up to £600m to finance the deal. The move ends weeks of speculation.
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The high street retailer predicts potential cost savings of up to £70m a year to be achieved due to increased buying scale, conversion of customers and joint marketing.
Steve Rowe, M&S, said: "I have always believed that M&S Food could and should be online."
Tim Steiner, Ocado's chief executive, said: "This is a transformative moment in the UK retail sector with the combination of two iconic and much-loved retail brands set to provide an unrivalled online grocery offer."
Ted Baker has warned that its profits will fall short of market expectations this year due to foreign exchange movements and additional costs.
The company said pre-tax profits for the financial year ended January 26 2019 are now expected to be £63 million, compared with consensus estimates of £73.8m.
Shares in the company plunged by 17 per cent in early trading on Wednesday.
Foreign exchange movements have affected profit by around £2.5m, primarily due to the change in the pound's value versus the dollar and euro.
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Upgrades to the group's systems have also cost approximately £2.5m, while transitions in Asia and the US resulted in a £5m writedown in the value of inventory stock.
The full results will be announced in March.
Housebuilder Taylor Wimpey said 2019 has got off to a "very positive" start despite Brexit uncertainty, as it notched up a rise in full-year profits.
The group posted a 5.5 per cent increase in underlying pre-tax profits to £856.8 million for 2018.
Taylor said it had continued to see strong home-buyer demand in spite of increasing signs that Brexit worries are weighing on Britain's property market.
Its order book stands at 9,622, according to the group.
Chief executive Pete Redfern said: "2018 was another strong year for Taylor Wimpey with good progress against our strategic priorities."
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