Deliveroo founder and chief government Will Shu stands to achieve greater than £172 million if a proposed £2.7 billion takeover by US meals supply big DoorDash goes forward, regardless of the corporate’s shares nonetheless languishing far under their 2021 flotation worth.
The board of Deliveroo introduced after markets closed on Friday that it was “minded to recommend” the 180p-per-share strategy from DoorDash, inserting the FTSE 250 agency firmly within the highlight forward of Monday’s buying and selling session. The American firm, which first approached Deliveroo earlier this month, now has till Could 23 to make a proper supply or stroll away.
If accomplished on the proposed worth, the deal would see Shu money in on his 5.9 per cent stake within the enterprise, having already bought shares price practically £15 million final September to fund private property investments. Nonetheless, for a lot of early buyers, the supply would crystallise heavy losses. Deliveroo’s £7.6 billion IPO in 2021 — the largest London itemizing for a decade — was infamously dubbed a flop after shares plunged 26 per cent on the primary day of buying and selling. Shares closed at simply 146.5p on Friday, down 62 per cent from the 390p itemizing worth.
Whereas the £2.7 billion proposal affords a 23 per cent premium to Deliveroo’s undisturbed share worth, it represents a a lot smaller uplift in comparison with current takeover exercise within the sector. In February, Prosus paid a 63 per cent premium to amass Simply Eat Takeaway, regardless of that agency affected by falling revenues and chronic losses. Deliveroo, against this, delivered a maiden pre-tax revenue of £12.2 million final 12 months and has proven income progress of 19 per cent since 2021.
The emergence of DoorDash’s curiosity is unsurprising in a market that has been consolidating quick, with scale more and more crucial for survival. DoorDash, which made its European debut by buying Finnish supply platform Wolt in 2022, has no geographical overlap with Deliveroo — an element more likely to ease regulatory considerations.
Nonetheless, there stays the potential for a rival bid. Amazon, which holds a 13 per cent stake in Deliveroo, may very well be a contender, though any transfer by the tech big would face intense scrutiny from UK competitors regulators.
DoorDash’s ambitions might see it develop Deliveroo’s platform past meals supply, following the same technique within the US the place it sells merchandise from manufacturers corresponding to Sephora. Deliveroo has already begun diversifying, partnering final 12 months with the likes of B&Q, Screwfix, and Not On The Excessive Avenue.
Whereas Deliveroo’s progress has slowed post-pandemic — with income up simply 3 per cent final 12 months in comparison with 57 per cent in 2021 — analysts imagine the corporate stays a invaluable asset. Analysis from Jefferies suggests DoorDash might justify paying as much as 230p per share with out damaging its free money stream, fuelling hopes that Deliveroo’s board might negotiate a better worth.
For now, Deliveroo shareholders are suggested to take no motion because the takeover discussions proceed. Nonetheless, with DoorDash eager to speed up its European growth and Deliveroo providing immediate entry to main city markets, a deal — whether or not at 180p or larger — seems more and more doubtless.
