John Lewis to invest £11 million in on-line food retailer
John Lewis to invest Pounds 11m more in online food retailer
Financial Times; Jun 15, 2001
By SUSANNA VOYLE
John Lewis Partnership, the department store and supermarket group, is to increase its investment in Ocado, the internet food retailer, as part of a Pounds 46m fundraising by the dotcom start-up.
Ocado, which will use John Lewis’s Waitrose brand when it starts operations this year, has raised the funds in an exceptionally difficult market.
Since the dotcom bubble burst last year online businesses have found it almost impossible to raise new funds. However, Ocado’s money, which comes mainly from John Lewis and UBS, the investment bank, values the group at about Pounds 200m.
John Lewis will inject Pounds 11m to maintain its 40 per cent equity stake in Ocado – formerly known as Last Mile Solutions. The group initially invested Pounds 35m for its 40 per cent stake. UBS has invested Pounds 20m for about 10 per cent of the business.
The rest of the money takes the form of Pounds 15m of new debt agreed by the group, which hopes to launch its service in London before the end of the year and plans to go nationwide within five years.
“We have managed to raise this money in a particularly challenging funding environment,” said Jason Gissing, Ocado finance director and one of three former Goldman Sachs bankers who founded the business at the start of last year. “The cash will provide us additional working capital for operations and expansion beyond launch.”
Unlike the leading UK supermarket groups, which are bolting their internet operations on to their existing businesses, Ocado is starting from scratch. It is building a 300,000 sq ft distribution centre at Hatfield, Herts, which it says will serve the London area initially, but will be capable of serving the whole of the south-east.
Ocado believes the online grocery market could be worth Pounds 25m or more within seven to 10 years. For Waitrose, the deal offers the hope of expansion outside its south-east England stronghold without the capital expenditure needed for building new stores. www.ft.com/e-tailing
