Online grocery group Ocado (OCDO.L) hopes to raise more than £1bn to capitalise on the rapid growth of online food and drink shopping seen since the start of the coronavirus crisis.
Ocado said in a statement after markets closed on Wednesday (10 June) it aims to raise cash through a mixture of newly issued shares and debt, giving it the “financial flexibility” to expand.
The company expects to raise £650m through a share placing with institutional investors, as well as a smaller £7m offering with retail investors.
The online supermarket also plans to borrow £350m by issuing a series of unsecured bonds due to mature in 2027.
The company said the coronavirus pandemic had “significantly accelerated” the shift towards online shopping. Ocado said there was “significant scope for expansion,” citing Nielsen data that suggests online penetration of the UK grocery market had doubled to 13% in recent months.
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Surveys of Ocado’s own customers indicate the trend will continue. 47% of customers who had increased their online spending since the pandemic began expected to continue doing so once the crisis is over, Ocado said.
“Online grocery is experiencing an inflection point,” said Tim Steiner, the founder and chief executive of Ocado.
“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 and Marks and Spencer (MKS.L) last year agreed to create a joint venture — a move that saw M&S acquire a 50% stake in Ocado’s retail business for £750m.
On 6 May, the company said that Ocado Retail had seen a 40% jump in sales in its second quarter, which ended on 1 June.
Ocado said on Wednesday that current trading remained consistent with those trends. It will publish results from the first half of its financial year on 14 July.
Calling itself “the only end-to-end solution provider for online grocery fulfilment globally,” Ocado said that the financial firepower from the planned fundraise would allow it to adapt and improve its position in the market.
“The group believes that that the capital raise will give Ocado Group the flexibility to move fast and capitalise on increasing opportunities arising from the acceleration in online penetration to expand and establish leadership positions in its existing as well as new products and markets,” the company said.