December 2, 2019 / 8:06 AM / 5 days ago

Ocado launches £500 million bond issue to fund robotic warehouse deals

LONDON (Reuters) - British online grocer and technology company Ocado (OCDO.L) has launched a 500 million pounds convertible bond offering, partly to fund the construction of robotic warehouses for its overseas partners, it said on Monday.

FILE PHOTO: A man walks from the main reception of the Ocado CFC (Customer Fulfilment Centre) in Andover, Britain May 1, 2018. REUTERS/Peter Nicholls

While Ocado’s retail business has only a 1.4% share of Britain’s grocery market, its state-of-the-art technology has enabled it to win partnership deals with supermarket groups around the world, including Kroger (KR.N) in the United States, Casino (CASP.PA) in France and most recently Aeon (8267.T) in Japan.

Those deals have powered the group’s 9.3 billion pound stock market valuation, up 68% this year.

Ocado shares were, however, down 5.2% at 0836 GMT, as the bonds can be converted into shares.

The guaranteed senior unsecured convertible bonds, due 2025, are expected to carry a coupon of between 0.75% and 1.25% per annum and have a conversion price premium of 40%-45%.

“The offering enables Ocado Group to diversify its funding sources and capitalise on attractive issuance conditions,” Ocado said.

The group also said that Ocado Retail’s revenue growth was expected to be 10% to 11% in the 13 weeks to Dec. 1, its fiscal fourth quarter, with growth in orders including those for Ocado Zoom, its ultra fast delivery service, slightly higher than retail revenue growth. Third quarter revenue growth was 11.4%.

A fourth quarter trading update is scheduled for Dec. 12.

In February, Ocado and Marks & Spencer (MKS.L) agreed a 1.5-billion-pound joint venture, signaling the end of Ocado’s long running supply contract with upmarket supermarket chain Waitrose in September 2020.

Goldman Sachs International and JP Morgan Cazenove are acting as joint bookrunners for the bond sale.

Reporting by James Davey; editing by Kate Holton and Emelia Sithole-Matarise

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