A DoorDash delivery person is pictured on the day they hold their IPO |
U.S. meal delivery group Doordash flagged an interest in a takeover of Britain's Deliveroo last month, two people familiar with the matter told Reuters.
San Francisco-based Doordash made the approach to Deliveroo,
but talks ended after disagreement on valuation, said one of the people,
speaking on condition of anonymity because the matter is private. There are no
talks ongoing, the person added.
Doordash and Deliveroo both declined to comment.
Deliveroo's shares, which have fallen by 67% since an August
2021 high of 395.9 pence, closed at 127.5 pence on Tuesday, valuing the
London-listed firm at 2.1 billion pounds ($2.66 billion). The shares jumped as
much as 6% to 135.1 pence on Wednesday morning following the news and were
trading at 132.2 pence as of 0752 GMT.
Doordash's New York-listed shares fell after the news before
closing up 1.25% on Tuesday.
A slowdown in demand for online food delivery since the
COVID-19 pandemic and investors’ preference for more profitable companies amid
higher interest rates have weighed on Deliveroo's shares since its March 2021
initial public offering.
The company works with 180,000 restaurants and retail
partners, and operates a network of 140,000 riders.
Amazon is Deliveroo's largest shareholder with a 13.23%
stake, followed by DST Global with 7.54%, while Deliveroo CEO Will Shu has a
6.46% holding, LSEG data shows.
Shu founded Deliveroo in February 2013, alongside his
childhood friend Greg Orlowski, the company says on its website.
At the outset of the company's 2021 listing, Shu was the
sole holder of Class B shares that gave him additional voting power, by owning
57.5% of the voting rights.
However this year, those shares were automatically converted
into class A shares, Deliveroo's IPO prospectus shows.
Analysts at Jefferies following the Reuters report said the
valuation gap between food delivery players in the U.S. and Europe is a
catalyst for cross-border M&A in online food delivery this year.
"In this instance, the talks have failed. But such is
the strength of the financial, industrial and strategic logic of a Deliveroo
takeover, we would not be surprised to see similar such headlines re-emerge in
the short term," they said.
Doordash, which has a $46.57 billion market value,
considered buying Deliveroo in 2022, the Sunday Times reported. Both companies
declined to comment at the time.
In an interview with the Financial Times in January this
year, Doordash CEO Tony Xu said the group is looking to diversify outside of
its core market in the U.S.
Doordash acquired Finnish rival Wolt in an all-share
transaction worth $8 billion in 2021.
Online food delivery companies have looked to pivot away
from unprofitable markets. Germany’s Delivery Hero said in May it planned to
sell its Taiwan business to Uber and sold its minority stake in Deliveroo in
January, according to reports.
Deliveroo reported a return to order growth in its first
quarter, with a 2% increase year-on-year driven by its operations in France,
the United Arab Emirates and Hong Kong.
Gross transaction value (GTV), a measure of the orders
placed through its platform, rose 6% to 1.83 billion pounds.