US rival DoorDash to acquire Deliveroo in major takeout agreement, valuing the British food delivery service at approximately £2.9 billion.
DoorDash Buys Deliveroo for £2.9 Billion: What You Need to Know
Turns out the junk food magic continues as US food delivery titan DoorDash has agreed to snap up fellow takeout colossus Deliveroo in a whopping £2.9 billion deal.
The San Francisco-based firm, the undisputed master of the US food delivery realm, will fork over 180p per share in cold, hard cash for Deliveroo. This proposal comes with a substantial 29% premium compared to Deliveroo's closing share price on the day before the offer period commenced, and a sizable 44% premium before DoorDash sent its initial offer letter.
The acquisition extends DoorDash's reach to nine more markets, such as the UK, which expands its operations to over 40 countries. The deal also brings the 'opportunity to allocate resources more effectively to strengthen competitive advantage,' according to the company.
In the year 2012, DoorDash was born, originally named Palo Alto Delivery, by a quartet of Stanford University students – Tony Xu, Stanley Tang, Andy Fang, and Evan Moore. Deliveroo, meanwhile, reared its head in 2013, spawned by US national Will Shu and Greg Orlowski after Shu lamented the meager late-night food delivery options in London.
Should this merger transpire, Shu stands to pocket a hefty £172 million, based on his 6.4% stake in the business. The ex-investment banker was elated about the partnership, calling it an "exciting new chapter" as both companies share a "strategic vision and aligned values."
Deliveroo's shares were up 2.2% to 175.9p on Tuesday morning, still well beneath its initial public offering price of 390p. Although Deliveroo's 2021 IPO witnessed more than a quarter of its value plummet on its first trading day due to concerns about the firm's financial losses, poor structure, and labor practices, it eventually chalked up its first annual profit last year as international sales recuperated and inflationary pressures eased.
Over the past year, Deliveroo has faced sluggish demand due to the relaxation of Covid-19 restrictions and cost-of-living pressures. This led the company to enact drastic measures, including job and marketing spending cuts, and exiting some territories, such as the Netherlands and Australia.
According to Matt Britzman, senior equity analyst at Hargreaves Lansdown, the acquisition could create a "fierce two-horse race" between DoorDash and Uber Eats, dominating the food delivery market.
This amalgamated force promises to have the market muscle to invest in product, technology, and overall top-notch consumer value. Will the combined entity be too powerful for competitors to handle? Stay tuned for updates on this tasty face-off.
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The newly formed powerhouse will boast a colossal customer base of 50 million monthly active users. This transaction will set the stage for a fiery battle against competitors such as Uber Eats and Just Eat Takeaway, making moves to further bolster their positions. The merger also paves the way for market consolidation, potentially leading to a more centralized food delivery sector.
The combined force promises to leverage its increased scale for better service to businesses, consumers, and couriers, helping to boost operational efficiencies and competitiveness. The acquisition is expected to solidify DoorDash's position as a significant player in the local commerce sector, bolstering its status in the food delivery market.
In the aftermath of DoorDash's £2.9 billion acquisition of Deliveroo, the merged entity will boast a formidable customer base of 50 million monthly active users. This transaction instigates a competitive landscape, as companies like Uber Eats and Just Eat Takeaway make strategic moves to assert their dominance in the food delivery market. The consolidation of markets could lead to a more centralized food delivery sector, allowing the newly formed powerhouse to better service businesses, consumers, and couriers, thereby enhancing operational efficiencies and competitiveness.
The increased scale gained from this acquisition will provide DoorDash with more resources to invest in product innovation and cutting-edge technology, ensuring the delivery of top-notch consumer value. The question remains whether the combined entity will prove too powerful for competitors to contend with in the near future. This merger unfolds an exciting new chapter, featuring a potential two-horse race as DoorDash and Uber Eats vie for supremacy in the local commerce sector.
