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Technology Stocks : Peapod (PPOD) -- Ignore unavailable to you. Want to Upgrade?

To: R. Bond who wrote (1112)	2/14/2000 8:09:00 AM
From: Rajiv	Respond to of 1170

Peapod Enters Into Letters of Intent for $120 Million Equity Financing CHICAGO--(BUSINESS WIRE)--Feb. 14, 2000--Peapod, Inc. (NASDAQ:PPOD - news), the nation's leading Internet grocer, today announced it has signed letters of intent under which Apollo Management, L.P., The Yucaipa Companies, Pequot Capital Management, Inc., and GRP II, L.P., will invest an aggregate of $120 million of equity in Peapod in a financing transaction that will significantly strengthen the company's position in the rapidly growing Internet grocery industry. ''From the outset, linking up with world-class partners was a key element of our funding strategy,'' said Bill Malloy, Peapod's President and Chief Executive Officer. ''The unique strengths and expertise that each of these investors brings across the board -- grocery, Internet, retail -- is unparalleled in this industry. These are investors that can bring Peapod the proven experience and resources we need to grow our business and deliver increased value to our shareholders.'' Speaking on behalf of the new investors in Peapod, Ronald W. Burkle of The Yucaipa Companies said, ''I've made substantial investments in traditional grocery companies and have studied the Internet grocery sector closely since it began. With its consumer database built over ten years of experience in several markets, Peapod is the best Internet grocery opportunity I've seen.'' Peter P. Copses of Apollo added, ''Peapod is in a unique position as the country's leading player in the rapidly growing Internet grocery category. Its management expertise will be complemented by the contributions of the new investors, particularly Yucaipa, positioning Peapod extremely well to capitalize on this substantial market opportunity.'' Peapod intends to use the proceeds of this financing to convert and expand its presence in current markets and to develop new markets. In 1999, Peapod began its conversion to a warehouse-based distribution model. The company recently accelerated this conversion with state-of-the-art distribution management and systems implemented by McLane Group L.P., a leading provider of distribution-logistics services and technology to food companies. ''We have been very pleased with the results of our new distribution model in Chicago and San Francisco,'' said Malloy. ''This strategy affords maximum flexibility, an improved higher-service model for customers and cost effectiveness in market rollouts. Now with this investment, Peapod will have the resources to capitalize on the brand it has created during the past decade, and our industry-leading customer base of more than 100,000 customers, through the execution of our demonstrated distribution strategy in other major markets.'' The financing is expected to close in early March and is subject to various closing conditions, including the negotiation and execution of definitive agreements and the satisfactory completion of due diligence. The letters of intent contemplate that the investors will purchase a total of $120 million of convertible preferred stock of Peapod with a conversion price of $8.00 per share. The investors will acquire $28 million of such preferred stock after the definitive agreements are executed, and an additional $92 million of preferred stock following receipt of shareholder and regulatory approvals. The terms of the preferred stock specify an initial annual dividend rate of 7.5% payable quarterly. At December 31, 1999, Peapod had approximately 18.2 million shares of common stock outstanding. As part of the transaction, each investor will receive with respect to each share of common stock into which the preferred stock is convertible, a warrant to purchase one share of Peapod common stock at $8.00 per share, subject to adjustment. The investors may exercise the warrants commencing one year after issuance, subject to earlier exercise in certain circumstances. Each investor will be making a separate investment and its obligation to make its investment is several, not joint. The letters of intent also contemplate that Peapod will increase the number of members on its board of directors from nine to 11, with the holders of the preferred stock having the right to elect up to five directors. Wasserstein Perella & Co., Inc., is serving as financial advisor to Peapod in this transaction.