​Deliveroo Avoids Takeover by American Giant DoorDash

Deliveroo has recently attracted interest from the American food delivery company DoorDash, which considered acquiring the British firm. However, the potential deal fell through due to a disagreement over price. This development comes as international bidders seek companies trading at relatively low valuations on the London Stock Exchange.

The news of DoorDash's interest saw Deliveroo's shares rise by 1.5 pence, or 1.2 per cent, closing at 129 pence. Analysts predict that this might not be the end of takeover attempts. Jefferies, a leading investment bank, suggested that DoorDash's interest might only be the beginning of a series of potential bids. They emphasised the strategic and financial benefits of acquiring Deliveroo. They hinted that understanding the perspectives of Deliveroo's founder and CEO, Will Shu, could be crucial for any successful takeover attempt.

DoorDash, valued at approximately $46 billion and listed on the New York Stock Exchange, is one of the largest food delivery companies in the world. The recent trend has seen numerous US-based firms acquiring UK companies, capitalising on the disparity in valuations between the two markets. Earlier this year, GXO Logistics, another US firm, acquired Wincanton, a UK transport company, for £762 million, aiming to expand its European operations.

Founded in 2013 by American-born former banker Will Shu, Deliveroo rapidly grew to facilitate restaurant meal deliveries across various markets. The company saw immense success during the COVID-19 pandemic when dining establishments were closed. Then-Conservative Party leader Rishi Sunak celebrated it as a "true British tech success story." However, recent times have been challenging for Deliveroo, with a decline in orders attributed to the cost-of-living crisis.

Deliveroo's initial public offering (IPO) in April 2021 was a significant event for the London Stock Exchange, though it was problematic. The company's shares plummeted from an initial price of 390 pence to around 282 pence on the first trading day. Nonetheless, Deliveroo reported upbeat earnings for the first time in March, with adjusted earnings before interest, tax, and other charges reaching £85 million for 2023, compared to a £45 million loss in 2022.

Jefferies recently highlighted Deliveroo as a potential takeover target amid increasing mergers and acquisitions (M&A) activity in the technology sector. The bank argued that consolidations could help companies achieve economies of scale, higher investment returns, and better intellectual property access. Merging firms could also accelerate their corporate ambitions through such consolidations.

Deliveroo faces stiff competition from other major players like Uber Eats and Just Eat Takeaway.com. The latter, formed from the merger of Just Eat and Takeaway.com, is now the largest food delivery group in Europe, operating in countries such as Germany, Canada, Australia, France, and Spain. In April, Just Eat reported a modest order growth of 1 per cent to 60.3 million across the UK and Ireland despite slashing prices to maintain its competitive edge. Deliveroo's shares, while recovering since then, continue to trade significantly below their IPO price.