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Delivery Hero is selling its stake in fellow online food dispatch group Deliveroo, as the sector comes down from the highs of the pandemic-boom of consumer demand for takeaways.
The Berlin-based group on Monday said it intended to sell up to 68.2mn class A ordinary shares in Deliveroo — equivalent to about a 4.5 per cent stake — and does not expect to hold any stock in the company after the settlement.
Food delivery groups have been coming under increasing investor pressure to demonstrate profitability as the cost of capital has risen sharply, while the sector has also been hit by the cost of living crisis.
The move comes two months before Deliveroo founder Will Shu’s dual-class shares are due to expire on the third anniversary of the company’s initial public offering. These provide him with extra voting powers — including the ability to block a hostile takeover.
Delivery Hero said the sale underlined its “commitment to disciplined capital allocation” and that the proceeds would be used for “general corporate purposes”.
Based on Deliveroo’s closing price on Monday of 121.90p, the sale could raise about £83mn.
Delivery Hero added it would place the shares through an accelerated bookbuilding process with institutional investors, with the results to be announced following pricing. It said the placement was expected to be finalised on Thursday.
Bradley Hughes, an analyst at Shore Capital, said DeliveryHero had represented “one of a few plausible acquirers in the consolidation debate” and attention would now shift to whether US food delivery group DoorDash could “use the opportunity to move in”.
Earlier this month, DoorDash chief executive Tony Xu told the Financial Times it was pushing into new markets.
Delivery Hero started building its stake in rival Deliveroo in 2021, when companies were seeking to capitalise on the boost in growth provided by the pandemic.
Chief executive Niklas Östberg said at the time he had “huge respect” for Shu and his team and that the company’s stock “felt undervalued”.
Deliveroo’s shares have been trading well below its IPO price of 390p but have risen more than 30 per cent in the past year.
About £2bn was wiped off its market value on the first day of trading in March 2021.
Shares in Delivery Hero have also dropped nearly 60 per cent in the last year.
Analysts at Citi in a note said they viewed its announcement on Monday “positively, given a modest improvement to its liquidity position”.
They added that the Frankfurt-listed company had around “€5.7bn of gross debt . . . maturating out to 2030” and liquidity of about €2.4bn as of September.
Delivery Hero in September confirmed it was in negotiations for a potential sale of its Foodpanda business in selected south-east Asian markets including Singapore, the Philippines and Thailand.
Barclays Bank Ireland, Goldman Sachs Europe and Morgan Stanley Europe are acting as joint bookrunners for Delivery Hero’s placement of Deliveroo shares.
Deliveroo declined to comment.
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