Ocado launches £500m bond issue to fund tech commitments

The online grocer said cash raised would be “used to fund capital expenditure in relation to Ocado Solutions’ commitments and general corporate purposes” and would enable it to “diversify funding sources and capitalise on attractive issuance conditions”.

The bonds will be issued by Ocado Group and initially guaranteed by Ocado Operating Limited, Ocado Innovation Limited, Ocado Central Services Limited, Ocado Solutions Limited and Ocado Holdings Limited.

The initial conversion price is expected to be set at a premium of between 40% and 45% above the volume-weighted average price of Ocado’s opening share price this morning and settlement will be in a week’s time. Final terms will be disclosed later today.

Ocado said there will be “a lock-up relating to equity and equity-related securities for a period commencing on pricing and ending 90 calendar days following the closing date, subject to certain exceptions”.

The convertible bond issue comes as Ocado’s technology is in increasing demand from overseas grocers and as the etailer innovates in its domestic market.

Last week, Ocado revealed a £7bn tie-up with Japanese food retailer Aeon, its first deal in Asia. It already has arrangements with other international giants such as Kroger in the USA.

Ocado also last week unveiled plans for a sixth UK customer fulfilment centre in Bristol.

The initiatives are part of its plans “to deliver the future of online shopping today”, chief executive and founder Tim Steiner said.

Alongside the bond proposals, Ocado updated the market on its retail performance. In the 13 weeks to December 1, retail revenue growth is expected to be between 10% and 11%, “with growth in orders including those for Ocado Zoom slightly higher than retail revenue growth”.

Goldman Sachs International and JP Morgan Cazenove are the joint book-runners for the convertible bond offer.