Deliveroo shares soar after rival buys stake
Delivery Hero’s £300m move sparks takeover speculation after food app’s disastrous London float
A £300 million stake in Deliveroo has been snapped up by a German rival, sending the takeaway app’s shares surging to their highest level since the company’s disastrous stock market float amid hopes it will be swept into a wave of industry deal making. Shares in Deliveroo rose as much as 11pc after the business disclosed that a 5.09pc holding had been built up by Delivery Hero, a £27 billion competitor based in Berlin. The stock closed yesterday at 345.9p, up 6.4pc.
A £300m stake in Deliveroo has been snapped up by a German rival, sending the takeaway app’s shares surging to their highest level since the company’s disastrous stock market float amid hopes it will be swept into a wave of industry deal making.
Shares in Deliveroo rose as much as 11pc after the business disclosed that a 5.09pc holding had been built up by Delivery Hero, a £27bn competitor based in Berlin.
The stock closed at 339.80p, up 4.5pc, the first time shares had surpassed the 331p at which they were valued when trading opened on March 31. They remain far below the 390p price which the first investors paid during Deliveroo’s calamitous initial public offering.
Niklas Oestberg, Delivery Hero’s chief executive, said he had invested in the company because it was “undervalued” and had been “oversold at IPO”.
While a takeover offer is not thought to be on the horizon, the German company’s stake raises the prospect that Deliveroo could be an acquisition target in a food delivery industry that has boomed during the pandemic.
One Deliveroo investor said Delivery Hero’s investment is a welcome sign and that industry consolidation is inevitable, adding “there has to be rolling up” in the industry.
Doordash, the US’S biggest food delivery company, is in talks to invest in German grocery delivery start-up Gorillas, while Uber has bought US rival Postmates and Amsterdam-headquartered Just Eat Takeaway has completed a $7.3bn (£5.3bn) takeover of Grubhub.
Mr Oestberg said Delivery Hero – which operates in around 50 countries across four continents – had opportunistically invested, sensing a bargain after Deliveroo’s shares crashed more than a third from their IPO price.
On Twitter, he said: “I know [Deliveroo chief executive] Will Shu for many years and I’m holding a huge respect for what he and his team have built. Company being oversold at IPO… Felt undervalued to us.”
Mr Oestberg added that the company is not currently buying more shares.
Deliveroo’s £7.6bn initial public offering was the biggest in the UK for a decade and had raised hopes that the London Stock Exchange could attract the high-growth technology companies that have traditionally flocked to the US. But shares fell by 26pc in one of the worst major debuts in UK history.
Mr Shu would have the last say on a deal because of a special share structure that gives him 57.5pc of the voting rights despite a stake of just 6.4pc. He has fended off takeover interest from Uber and Amazon, which has an 11.9pc stake.
Deliveroo, which operates in 12 markets, competes against Delivery Hero in the United Arab Emirates, Hong Kong and Singapore.
Giles Thorne, a Jefferies analyst, said a tie-up would be seen as a chance to dominate in rapid grocery delivery. Deliveroo has a partnership with Waitrose.
Mr Oestberg said the company had invested in Deliveroo at an average share price of 270p, an outlay of around £236m. Its share price puts the stake at just over £300m.