Ocado launches $642m bond issue to fund robotic warehouse

British online grocer and technology company Ocado has launched a 500 million pounds ($642 million) convertible bond offering, partly to fund the construction of robotic warehouses for its overseas partners.

While Ocado’s retail business has only a 1.4 percent 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 in the US, Casino in France and most recently Aeon in Japan.

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

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

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

The group also said that Ocado Retail’s revenue growth was expected to be 10-11 percent in the 13 weeks to December 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 percent.

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

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