NEW YORK (CNNfn) - Troubled online grocer Peapod Inc. announced Friday that Royal Ahold, one of the world's largest food retailers, agreed to invest $73 million in Peapod, giving it a majority stake in the company.|
Under the agreement, Chicago-based Peapod will continue to operate as an independent company, but will receive goods and services from Ahold, the Netherlands-based operator of Edwards, Stop & Shop, Giant-Landover, Tops Markets and Bi-Lo supermarkets.
Ahold, which posted $20.3 billion in sales from its 1,063 stores last year, will invest $73 million in a newly issued series of convertible preferred Peapod stock at $3.75 a share. That represents 51 percent of Peapod's outstanding stock.
In addition, Ahold will immediately exercise warrants for additional shares of common stock that will increase its holdings in Peapod's voting stock to 75 percent.
In addition, Ahold will extend to Peapod $20 million in revolving credit.
"Peapod is extremely excited to be partnering with the innovative Ahold family of companies," Andrew Parkinson, Peapod's chairman and co-founder said in a prepared statement Friday. "This transaction creates a huge potential for Peapod to capture the rapidly growing online grocery business in the highly populated area along the U.S. eastern seaboard."
The agreement with Ahold comes as Peapod (PPOD: Research, Estimates) has been struggling with recurring operating losses that have drained the company's operating cash. Bill Malloy, the company's former chief executive, resigned suddenly last month, prompting investors to pull $120 million from the company and seriously jeopardizing its ability to stay in business.
Peapod's shares had plummeted from a 52-week high of 16-3/8 in November to a rock bottom of 2-1/2. The stock rose 11/16 to close at 3-3/16 on Nasdaq Friday following the announcement.
Another part of the agreement calls for Peapod to open more than 50 "fast pick" fulfillment centers, where customers can pick up their online orders in person at storage areas in Ahold stores.
Peapod already has similar supply agreements with Ahold supermarkets Stop & Shop in Boston and Edwards in New York.
Shares of Royal Ahold (AHO: Research, Estimates) slipped 5/8 to close at 25 on the New York Stock Exchange Friday.