DoorDash to acquire British meal delivery firm Deliveroo for about US$3.85-billion

U.S. meal delivery firm DoorDash DASH-Q will buy Deliveroo in a deal valuing the British rival at about £2.9-billion ($3.85-billion), the companies said, banking on their combined reach and local expertise to take on competition.

Separately on Tuesday, DoorDash said it would buy SevenRooms, a New York City-based hospitality-related software company, for about $1.2-billion.

Analysts have said the food delivery sector is ripe for further consolidation as inflation and squeezed incomes has made consumers more cautious about spending on deliveries and similar businesses have found it difficult to add scale.

The companies revived talks last month after DoorDash approached Deliveroo with a 180 pence per share proposal. It was confirmed on Tuesday as the final offer, sending Deliveroo shares up about 2 per cent.

Even at Tuesday’s high of 176.40 pence, the stock traded under the offer price. Deliveroo’s shares have struggled since their debut when they were sold at 390 pence in 2021, when meal-delivery services were boosted by the pandemic.

Deliveroo’s founder and CEO Will Shu, who delivered take-aways on a scooter in the group’s early months, said comparing the IPO price with the deal was not necessarily fair.

“That was a different time, (and) a different interest rate environment,” he told Reuters, adding that the stock had traded above the IPO price at one point and barely above 70 pence.

Deliveroo had a bright future, he said, but it had larger global competitors.

“The board and myself evaluated that and said: ‘Where do we think Deliveroo should be in order for us to truly win?’” he said. “And we thought this was the right place for us.”

Russ Mould, investment director at AJ Bell, said too many food delivery companies were chasing the same opportunity and that was unsustainable.

“Only the strongest will survive and they’re the ones picking up smaller rivals who realize their future is best part of a bigger entity, and not going it alone,” he said.

The acquisition will help DoorDash grow its market share in Europe, competing against Just Eat and Uber Eats, as it adds Deliveroo’s largest market, Britain and Ireland to its roster, along with others.

“In addition to having the foundation in which we can add scale to our investments in Europe, we have the possibility to introduce new products to the market,” DoorDash CEO Tony Xu said on a post-earnings call.

In 2024, Deliveroo and DoorDash combined had orders worth about $90-billion, the companies said, with roughly 7 million and 42 million monthly active users, respectively.

DoorDash’s Nasdaq-listed shares fell about 7 per cent after the company also gave a broad forecast for second-quarter profit.

It expects adjusted earnings before interest, tax, depreciation and amortization to be between $600-million and $650-million, compared with the average analyst estimate of $627-million, according to data compiled by LSEG.

DoorDash said demand remained strong, but that it was “conscious of the potential for changes in consumer demand.”

Uber, whose food delivery unit has recorded strong growth, said on Tuesday it would acquire an 85 per cent stake in Turkish e-commerce firm Trendyol’s online food delivery business for about $700-million.

San Francisco-based DoorDash said it would not increase its Deliveroo offer, but reserved a right to do so if a third party emerged with a competing offer.

Deliveroo said it has received undertakings of support from investors holding 15.4 per cent of shares, including from Shu and investment firms Greenoaks and DST Global.

For the deal to go through, Deliveroo will need the approval of at least 75 per cent of shareholders.

Panmure Liberum analysts highlighted “the notable absence” of Deliveroo’s largest shareholder, Amazon, adding that they still see Amazon as the most likely counter bidder.

Amazon, which has a 14.38 per cent stake, declined to comment.

Shu, who will receive £172.4-million for his 6.4 per cent stake, declined to comment on discussions with shareholders.

The deal is not expected to face regulatory hurdles, as DoorDash has virtually no presence in Deliveroo’s 10 markets, a source told Reuters last month.

Shu, who co-founded Deliveroo in 2013 with his childhood friend Greg Orlowski, said he had not made any decisions about his future.

Previous negotiations with DoorDash ended in disagreement over Deliveroo’s valuation, Reuters reported last year.