Delays in launching Ocado into global orbit have been a little like waiting for Godot. Hedge funds used it to justify making Tim Steiner’s outfit among the most shorted stocks in the FTSE 250, and at least one analyst suggested a fair valuation for the shares would be zero. How wrong can you be?
The Morrisons contract in the UK was much mocked because of its wafer-thin margins, but it kept Ocado buzzing while international deals arrived.
In much the same way as Sainsbury’s acquisition of Argos and its proposed merger with Asda have Amazon written all over them, so has the Ocado-Kroger transaction in the US.
After Amazon’s big bite of Whole Foods, giving it the supply chains to go with the technology and distribution, grocery space is transformed.
The matrix: Robotic carts move around a grid preparing customers’ orders at the Ocado warehouse in Andover
Ocado, with its robotics and advanced warehousing, is winning friends everywhere. Groupe Casino has swallowed Gallic pride and adopted Ocado in Paris.
Sobeys in Canada, ICA in Sweden and now £90billion Kroger in the US have also chosen Ocado.
As so often, the financing is opaque but Kroger is showing good faith by buying a chunky 5 per cent of the existing share capital.
The plan is for Kroger to identify 20 warehouse sites in the US to be filled with Ocado’s gee-whizz tech in three years. As a quid pro quo, Steiner and friends will break off relations with other American suitors.
It would be nice, as a nation of shopkeepers, if Britain found its digital champion in Ocado. Certainly, the stock market is ecstatic, bumping the shares up 44 per cent.
But before anyone gets overexcited it is worth remembering that breaking into the American market can be difficult.
One cannot imagine the Teamsters union, for instance, being entirely happy about warehousing which replaces toilers with computers and systems analysts.
There must also be questions as to whether Ocado has the management capacity to deliver the systems, and what the response will be from ruthless rivals Amazon and Walmart.
A zany ride lies ahead.
Probably just as well that FTSE 100 panjandrum Martin Gilbert has cleared the decks by temporarily stepping aside as a director of Glencore to give more attention to Sky, as we move towards an end game for the future of the pioneering broadcaster.
There are several possible outcomes. The frontrunner has been 21st Century Fox’s offer to buy the rest of Sky it does not own, held up by regulatory tangles.
If the Murdoch family bid fails to complete in time, at the very least their 39.1 per cent Fox stake in Sky will roll into the Walt Disney offer for most of Fox’s assets. Also on the table is the gatecrashing £20billion offer for Sky from Comcast boss Brian Roberts.
Comcast says the debt to finance its bid can be absorbed because of low gearing and strong cash flow. But what if Roberts goes head-to-head with Disney and seeks Fox’s entertainment assets as well?
Moody’s investor services says Comcast debt would soar to a ‘staggering’ £123billion, making it the most highly indebted non-financial group in the US, with the possible exception of AT&T if the latter eventually wins Time Warner.
That debt would breach Comcast’s commitments to a conservative financial approach and put at risk secure credit ratings.
On current cash flow and merger synergy the forecasts are that it would take up to four years to bring debt down to previously acceptable levels.
Bid competition is to be welcomed. But if it were to put future investment plans in production, technology and innovation at Sky at risk, it could quickly become a second-best outcome.
Jolly good that Helena Morrissey is breaking new ground at L&G Investment Management, launching L&G Future World Gender in Leadership Fund (GIRL), by allocating more to companies with higher levels of gender diversity.
It was a bit of a shock, though, to find my old friends at Melrose Industries bottom of the FTSE gender diversity league, with a score of zero.
This, curiously, was ignored by L&G fund managers last month when its last-ditch vote put the bloke-dominated board at Melrose over the top in its successful quest to buy GKN, headed by Anne Stevens.
Time for a gender stewards’ inquiry.