US Food Delivery Firm DoorDash to Acquire UK’s Deliveroo in New Global Expansion Push

UK food delivery firm Deliveroo will be acquired by DoorDash at a $3.9 billion valuation, CNBC reported. The UK firm allows users to order groceries and hot meals through an app. Deliveroo said its board agreed to the acquisition.

“Following careful consideration, the Deliveroo Independent Committee has unanimously decided to recommend this offer, considering it to be in the interests of all our shareholders and wider stakeholders,” Deliveroo Chair Claudia Arney said.

The Acquisition Deal

The DoorDash Deliveroo deal will see the US food delivery company buyoff all issued shares at $2.40 (180 pence) per share. This price represents a 44% rise on Deliveroo’s closing share price on April 4, the last day of business for the British firm before it received the initial offer letter from DoorDash.

According to DoorDash, the acquisition terms are final, they will not be increased unless another party offers a rival bid.

“I could not be more excited by the prospect of what DoorDash and Deliveroo will be able to accomplish together. We’ll cover more than 40 countries with a combined population of more than 1 billion people, enabling us to provide more local businesses with the tools and technology they need to thrive,” DoorDash CEO and Co-founder Tony Xu said.

Last week, Deliveroo’s stocks surged to a three-year high after the firm confirmed receipt of the DoorDash takeover offer. Its shares gained 2% on May 5 after news of a deal hit the market.
DoorDash’s second quarter forecasts showed that its profits would fall below estimates.

This forecast caused its stocks to surge 7% in US premarket trading. The company adjusted its pre-tax earnings, depreciation, interest and amortization to between $650 million and $600 million. This falls within the $627 million projected by analysts. Last year, DoorDash and Deliveroo had combined orders worth $90 billion and an estimated 42 million and 7 million active users respectively.

A Challenging Ride

Deliveroo was listed on the London Stock Exchange back in 2021. Its acquisition brings to an end the challenging ride that the public company has had in the British food delivery sector.

At the time of listing, the UK was experiencing Covid-19 lockdowns. The situation at the time supported the rapid growth of commerce platforms, including food delivery companies. Deliveroo went on to become a preferred brand in the UK. Even so, investors were wary of its growth after the pandemic. They also saw fierce competition as a big risk for the company at the time.

These factors affected its debut at the London Stock Exchange, causing its stocks to plunge 30%. Since then, its Deliveroo share prices have continued to spiral downwards. Currently, their value is 50% of the £3.90 initial offering price.

DoorDash Global Expansion

Both DoorDash and Deliveroo leverage smartphone technology to link customers and restaurants to a wide network of delivery riders. For DoorDash, the move to acquire Deliveroo reflects a renewed effort to expand its global footprint.

In 2022, the American company acquired Wolt, a Finnish food delivery app for $7.9 billion. The Deliveroo deal is the second international takeover for the US company in three years as it seeks to expand from the US, Australia and Canada.

Deliveroo operates in 9 countries, including Ireland and the UK. In 2023, the two countries accounted for 59% of its food delivery business. Deliveroo also operates in Belgium, Italy, France, Kuwait, the United Arab Emirates, and Qatar. By acquiring Deliveroo, DoorDash will significantly expand its European market share.

The food delivery firm will be better positioned to compete with Uber Eats and Just Eat in the UK European markets. Once the Deliveroo acquisition deal is completed, DoorDash will be operational in over 40 countries. Last week, DoorDash said it will be spending an estimated $1.2 billion to acquire New York-based hospitality software firm SevenRooms.