Shares of Deliveroo experienced a notable surge, rising by as much as 7% during morning trading on Wednesday, following reports of potential takeover interest from its US counterpart, DoorDash.
Speculation around Deliveroo being eyed for acquisition intensified after it was revealed that DoorDash had approached the UK-based delivery giant last month with a proposal for acquisition. However, discussions reportedly faltered as both parties failed to reach an agreement on the valuation.
Neither Deliveroo nor DoorDash has officially commented on the matter so far.
This isn’t the first time such rumors have surfaced; similar talks were reportedly circulating in 2022, highlighting ongoing interest in Deliveroo from major players in the food delivery industry.
Analysts from Jefferies suggested that despite the current setback in negotiations, the strategic and financial rationale for a Deliveroo takeover remains compelling. They indicated that the failed talks with DoorDash could potentially pave the way for other suitors to express interest in acquiring Deliveroo in the near future.
“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,” commented analysts at Jefferies.
Deliveroo, co-founded by CEO Will Shu in 2013, operates across 10 countries globally and collaborates with approximately 140,000 riders. Despite challenges such as driver strikes over pay and working conditions, the company reported a reduced annual loss of £31.8 million for 2023, down from £294.1 million in 2022.
While the number of orders slightly decreased year-on-year to 290 million, the gross transaction value (GTV) increased by 3% to £7.1 billion, reflecting sustained consumer demand for delivery services.
Deliveroo noted a turnaround in order growth in the first quarter of 2024, with a 2% increase, indicating resilience and potential for expansion amidst operational challenges.
In contrast, DoorDash, valued at $46.57 billion (£36.76 billion), has been proactive in expanding its market presence through strategic acquisitions, including the purchase of Finnish rival Wolt for $8 billion (£6.3 billion) in 2021.
The dynamics of the food delivery sector continue to evolve rapidly, driven by technological advancements and changing consumer behaviors, presenting both challenges and opportunities for key players like Deliveroo and DoorDash.