UPDATE 3-Ocado seals new international tie-up with Sobeys in Canada

* Follows agreement with French supermarket Group Casino

* Ocado sees opportunity in North America -CFO

* Ocado shares jump (Adds reaction, short selling details)

Jan 22 (Reuters) - Ocado has sealed a deal to allow Canada's second largest food supermarket group Sobeys to use its ecommerce platform, sending the British online retailer's shares up nearly 18 percent on this latest international tie-up.

Ocado, which has helped to drive online shopping in Britain, one of the world's most advanced ecommerce markets, has been trying to sell its proprietary technology to international supermarkets in the past few years, with new deals seen as key to the company's valuation.

The deal with Sobeys, which operates more than 1,500 stores across Canada, helped Ocado's shares to build on gains recorded in November when it announced a deal with French supermarket Group Casino.

"Channel shift to online in North America is gaining pace as consumers increasingly seek the benefits of grocery shopping from the comforts of their own homes, and as retailers attempt to offer services to meet this growing customer trend," said Luke Jensen, CEO of Ocado Solutions.

Founded in 2000 by three Goldman Sachs brokers, Ocado has divided investors over its prospects after it took 15 years to make a profit. Its argument that it should be valued as a technology provider rather than a retailer has proved controversial.

Some view its door-step deliveries from giant automated distribution centres as the future of grocery shopping while others see it as an over-valued and over-hyped retailer struggling to grow market share in a tough market.

A self-imposed target to agree an international technology deal in 2015 came and went with no announcement. This weighed on its shares and attracted the attention of short sellers.

According to market data, around 10 percent of the company's shares are held by short sellers. They will have taken a hit after its stock almost doubled from the day before it agreed its French deal in November.

The rise on Monday gave it a market value of around 3 billion pounds.


"Investors have been tempted to bet against Ocado because of its eye-watering valuation," Laith Khalaf, Senior Analyst, at Hargreaves Lansdown, said. At 140 times earnings, the online retailer looks like an extremely pricey bit of kit, he said.

"However its share price is looking forward to future earnings based on licensing out its online delivery technology, rather than the revenues it's currently making from food retail. In this respect, Ocado is more Amazon than Asda," he said, referring to the British arm of Walmart.

Under the Sobeys deal, the two companies will develop a customer fulfilment centre (CFC) in Toronto using Ocado's grid and robots network and will also consider developing more centres in dense urban areas.

Ocado will help Sobeys to build a website and mobile service, and manage its delivery system and customer service.

Sobeys had recorded sales of C$23.8 billion last year.

Ocado said the deal would be earnings neutral in the 2017-18 year, while additional capital expenditure of 15 million pounds would be incurred. For 2018-19 and beyond, Ocado said profits would grow as the fees from Sobeys increased, and as other partnership deals were signed, though more capital expenditure would also be required.

Michael Medline, president and CEO of Sobeys, said: "Our end-to-end ecommerce solution will allow Sobeys to build an online offer in a manner that is profitable and creates exceptional value for our customers, investors and supplier partners."

The timing of the deal is likely to be a boost for Ocado, as speculation grows that competition could intensify in Europe after Amazon's acquisition of Whole Foods.

Analyst Khalaf said Amazon's move may have flushed deals out into the open for Ocado. "The threat of a big disruptor entering the sector puts pressure on food retailers to be on top of their game when it comes to online deliveries, and that's where Ocado comes into its own."

($1 = 0.7201 pounds) (Additional reporting by Rahul B in Bengaluru and Simon Jessop in London.; Writing by Kate Holton. Editing by Jason Neely and Jane Merriman)