Ocado has launched an ambitious bid to raise £1bn in fresh funding to help it capitalise on the “significant acceleration” in online shopping during the coronavirus pandemic.

The grocer-cum-technology provider has successfully raised £650m through the placing of new shares, as announced yesterday, and plans to raise a further £350m through the issuing of unsecured convertible bonds.

Ocado said the move would provide it with the financial firepower to support its current partners – including US grocery giant Kroger, French operator Casino and Canadian supermarket chain Sobeys – and take advantage of the “huge” opportunity to pen more deals with retailers in other global markets.

Tim Steiner

Source: Peter Searle

Tim Steiner said the pandemic ‘will redraw the landscape for the grocery industry worldwide’

It has already committed to building 54 of its automated warehouses for its stable of partners, which also includes the likes of Aeon in Japan and Australian retailer Coles.

After announcing the share placing on June 10, the grocer confirmed this morning that the placing had been completed, raising up to approxmiately £657m and comprising 33,163,265 new shares, or 4.7% of the existing issued ordinary share capital of the company. 

Ocado said it expected the “significant growth” in online grocery shopping during coronavirus to “generate a permanent and significant increase in online penetration”. The company insisted that meant it had plenty of “scope for expansion” across the globe, with an opportunity to generate licensing fees of between £3.5bn and £26.3bn.

The funding would also help develop its relationship with existing partners, which Ocado said “may require faster growth in fulfilment capacity” than previously planned as a result of the seismic shift to online shopping.

Ocado added that cash would also be used invest in innovation “at a faster pace” to help it “leverage its technology and expertise in other adjacencies” outside of grocery and to “expand” its position as “the leading end-to-end solution provider for online grocery fulfilment globally”.

If the raise was successful, Ocado would have cash and cash equivalents of £2.2bn – a sum it said would put it in “a powerful position to fulfil its medium-term growth aspirations”.

Ocado founder and chief executive Tim Steiner said: “Online grocery is experiencing an inflection point. The current crisis is proving a catalyst for permanent and significant acceleration in channel shift globally which we believe will redraw the landscape for the grocery industry worldwide.

“Ocado’s model is proven, providing a flexible platform with the best customer offer and economics, and we are already the partner of choice for nine of the world’s largest grocery retailers. The significant acceleration in online grocery provides us with greater opportunities than ever before.”

He added: “As we emerge from this crisis, Ocado has the opportunity to help our Ocado Solutions partners in the UK and around the world grow faster, to welcome more partners in new markets, to innovate more and more quickly, and to further strengthen our leadership position.

“This capital raise gives Ocado Group the opportunity to accelerate our role in creating sustainable change in the industry, allowing us the flexibility to move at increased pace and capitalise on the full opportunity set over the medium term.”

The grocer-cum-technology provider has successfully raised £650m through the placing of new shares and plans to raise a further £350m through the issuing of unsecured convertible bonds.