Ocado set to go public

Ocado, the on-line grocer, is to announce its intention to float on the stock exchange and will come to the market in July via an initial public offering with a price tag of £1bn.


The internet-only grocer was set up 10 years ago by three ex-Goldman Sachs bankers and Ocado is aiming to have its shares traded on the London Stock Exchange by 20 July.


Best-known for selling Waitrose food online, Ocado is offering half a million of its customers the opportunity to buy shares in the stockmarket flotation. Customers who have spent over £300 at Ocado since the start of 2010 have been encouraged to take part in the flotation.


It is coming to the market on the back of robust sales. In May it clinched an eight-year supply deal with Waitrose, which underpins the solidity of its position as an internet food retailer. Either side has the option to extend the deal for a year.


The arrangement clears up the position of Waitrose's own home delivery service, Waitrose Delivers. Under the old arrangement, this was not allowed to operate within the M25 area until mid-2012. Under the new deal, Waitrose Delivers can operate there from July next year.


The latest Ocado figures show sales rose 22% to £427.3m in the year to last November. Ocado has yet to make a profit. This is due to heavy investment – £350m was raised to build up the company, which caused a great deal of speculation as to whether Ocado would ever float at all.


Some experts forecast that with the existing Ocado business model, it could never make a profit. However City analysts reckon there is a 90% probability that Ocado will float successfully.

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