Ocado shares plunge to three-year low after AmazonFresh launch

The continued plunge in Ocado's share price following the UK launch of AmazonFresh is making it more susceptible to a takeover from the internet giant, City experts have said.

Shares in Ocado dropped to a three-year low on Tuesday, down more than 7%, as the retailer recorded its third consecutive session of losses.

Analyst Clive Black, of Shore Capital, said Amazon may make a swoop for the online retailer if its share price continues to fall.

"Amazon's first market is London, which is Ocado's most profitable market and people subscribing to Amazon Prime will also have a decent overlap with Ocado because they are tech-savvy."

"If Amazon continues what it is doing, it can buy Ocado at a lot cheaper price than it is now because Ocado's value is declining by the month".

Ocado has seen its value take a hammering amid fears that Amazon's charge into the grocery sector will ramp up competition in London and threaten its foothold in the capital.

Amazon began rolling out fresh food deliveries in the UK on Thursday, with the service available to customers in 69 central and east London postcodes who are members of the retailer's Prime subscription service, for an additional £6.99 a month.

It comes after Amazon signed a deal in February with Morrisons, which has agreed to provide wholesale ambient, fresh and frozen products to Amazon despite already operating its own website in partnership with Ocado.

The arrival of the retail giant's fresh food delivery service looks set to intensify the supermarket price war raging through the grocery sector, which has seen the Big Four - Tesco, Sainsbury's, Asda and Morrisons - look to counter the threat of German discounters Aldi and Lidl by slashing their prices.

Analysts warned last week that the launch of AmazonFresh would be bad news for the country's established supermarket heavyweights, leaving Tesco and Sainsbury's ''exposed''.