Ocado Plunges After John Lewis Sells Stake in Grocer

(Corrects name of Ocado’s largest shareholder in eighth paragraph of story originally published Feb. 11.)

Ocado Group Plc, the U.K. online grocer that sold shares to the public for the first time last year, dropped as much as 18 percent in London trading after the second-biggest shareholder sold its entire stake.

The shares fell as much as or 50 pence to 235 pence, after surging 57 percent in the month before the sale by John Lewis Partnership Plc’s pension fund of its 10.4 percent holding. The sale was executed at a price of 265 pence a share, according to a statement from Goldman Sachs Group Inc., which managed the offering of 57.3 million shares to institutional investors.

The sale is likely to address an “imbalance” between supply and demand in the shares that had helped boost the price, according to James Grzinic, an analyst at Jefferies International Ltd. in London. Yesterday’s closing price of 285 pence was the highest since Ocado initially sold shares to the public on July 21, 2010. The original offer price was 180 pence. Today’s drop was the steepest since the IPO.

Ocado said the sale won’t affect its commercial arrangement with John Lewis’s Waitrose supermarket chain, under which the online retailer supplies Waitrose goods. The companies entered a decade-long supply agreement in May 2010 that allows Ocado to use the Waitrose brand on its website and vans.

John Lewis’s transfer of the stake to its pension fund in 2008 “signalled the relationship had evolved some time back from an operational to more of a financial interest,” Grzinic wrote. He has a “hold” recommendation on Ocado.

First Profit

John Lewis said today that the sale of the stake was part of the fund’s “investment management activities.”

Appleby Trust (Jersey) Ltd., an independent company that acts as the trustee for Ocado’s employee benefits, holds 5.9 percent of the stock, according to data compiled by Bloomberg.

The Apple Trust is the company’s largest shareholder with a 10.7 percent stake, according to data compiled by Bloomberg.

The Web retailer reported a quarterly profit for the first time in February as customer numbers increased and shoppers bought more products. Ocado is Britain’s fourth-largest online food and grocery retailer, according to Verdict Research.

To contact the reporter on this story: Clementine Fletcher in London cfletcher5@bloomberg.net.

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net.

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