Ocado Said to Have Insufficient IPO Orders Ahead of Tomorrow's Deadline
An Ocado Ltd. delivery driver transports a customer's order. Photographer: Jason Alden/Bloomberg
Ocado Ltd., the unprofitable U.K. online grocer, hasn’t received enough orders for all the stock on sale in its initial public offering, a day before the deadline for taking orders expires, according to two people with knowledge of the matter.
The IPO will probably be priced below the mid-point of the range set by the company, said one of the people, who declined to be named as the information isn’t public. The shares are being offered at 200 pence to 275 pence each.
A spokesman for Ocado said the IPO was proceeding according to plan. He declined to comment on the valuation.
Ocado plans to sell shares to generate a market value of as much as 1.3 billion pounds ($1.98 billion). The proposed valuation has been questioned by analysts including Clive Black at Shore Capital and David McCarthy at Evolution Securities, who said the company requires “substantially” more investment.
“Risks are too great and that without a track record, Ocado does not justify any kind of multiple,” McCarthy wrote.
Ocado plans to sell 200 million pounds ($306 million) of new stock in the IPO, the same amount that existing shareholders plan to raise. The Hatfield, England-based company has secured orders for more than 200 million pounds, one of the people said.
The book for institutional investors is scheduled to close tomorrow, while the deadline for retail investors to participate in the share sale expires today, according to a term sheet for the sale obtained by Bloomberg News.
New Warehouse
The grocer, founded by three former Goldman Sachs Group Inc. bankers, plans to use the IPO proceeds to cut debt and acquire a new automated warehouse. Ocado hasn’t reported an operating profit in its 10-year history and is pressing ahead with the share sale after the postponement or cancellation of at least 55 global IPOs since April. Fairfield Energy Plc, a North Sea oil and gas company, postponed its 330 million pounds London IPO last week, citing “market conditions.”
Ocado is Britain’s fourth-largest online food and grocery retailer after Tesco Plc, J Sainsbury Plc and Wal-Mart Stores Inc.’s Asda, according to research company Verdict. The retailer has said it controls about 14 percent of a market worth about 3 billion pounds a year. It reported a first-half operating loss of 2.7 million pounds.
The grocer sells around 20,000 products to shoppers mainly in the south east of the U.K., including ranges from Waitrose Ltd., the employee-owned supermarket chain whose parent John Lewis Partnership Plc holds an Ocado stake in its pension fund.
JPMorgan Cazenove Ltd., UBS AG and Goldman Sachs Group Inc. are managing Ocado’s share sale, along with Barclays Capital, HSBC Holdings Plc, as well as Jefferies Group Inc., Lloyds Banking Group Plc and Numis Securities Ltd.
-- Editors: Paul Jarvis, Heather Harris.
To contact the reporter on this story: Zijing Wu in London at zwu17@bloomberg.net; Sarah Shannon in London at sshannon4@bloomberg.net.
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