Deliveroo sells to DoorDash for a staggering £2.9 billion deal.
Venture into Europe: DoorDash secures Deliveroo in a whopping £2.9bn deal
San Francisco-based DoorDash is set to acquire Deliveroo, a UK-based food delivery company, for 180p per share in cash. This move comes after Deliveroo's rocky journey on the public markets.
Operating a food delivery app in nine countries, Deliveroo has faced tough competition, including Uber Eats. However, the company managed to report a profit in March of this year, marking a significant milestone.
Consolidation is becoming increasingly common in the food delivery sector as companies aim to grow by increasing their size. Earlier this year, Prosus, the European investment arm of South African group Naspers, sealed a €4.1bn deal to take Europe's biggest food delivery group Just Eat Takeaway private.
On Tuesday, both Deliveroo and DoorDash announced that their boards have agreed to the final terms of this cash deal. DoorDash's operations primarily focus on the US, Canada, Australia, and New Zealand, ensuring the acquisition won't attract competition regulators' scrutiny due to the lack of overlap with Deliveroo.
DoorDash, known for its aggressive expansion, notably purchased Finnish delivery app Wolt in a €7bn all-stock deal in 2021. Now, the company is preparing to enter European markets with the acquisition of Deliveroo.
For Deliveroo, this move marks the end of a challenging period as a UK-listed company. Since its 2021 Initial Public Offering (IPO), Deliveroo's shares plunged and never recovered. CEO Will Shu considers this acquisition the beginning of a "transformative new chapter" for Deliveroo, as the merged entity will be about 30 times its size based on market capitalization.
Tony Xu, DoorDash's CEO and co-founder, expressed excitement about the acquisition, stating that it combines DoorDash's strong operating playbook with Deliveroo's local expertise. Both companies are diversifying their services to include grocery and other retail delivery, as well as expanding their advertising businesses to boost profitability.
According to analyst Sean Kealy from Panmure Liberum, DoorDash intends to invest heavily in Deliveroo, a clear indication that the acquisition is aimed at bolstering competitiveness in their respective markets.
The deal is expected to further consolidate the food delivery sector, reduce fragmentation, and increase the dominance of a few large global players. This may lead to improved efficiencies, but competition could decrease in some markets. The acquisition also positions DoorDash for broader growth in local commerce by integrating Deliveroo's local expertise and services.
- The investment by DoorDash in Deliveroo, a move aimed at bolstering competitiveness in their respective markets, is expected to drive growth in technology-driven business ventures, particularly in the food delivery markets.
- With this acquisition, DoorDash, known for its aggressive expansion, is preparing to enter European markets, diversifying its services to include local expertise from Deliveroo, and investing heavily in technology to improve efficiencies and expand in local commerce.
