Delivery Hero exits Deliveroo as takeaway demand wanes

Delivery Hero has exited completely from its fellow online food order group Deliveroo with a £77mn sale of its entire stake as consumer demand for takeaways has dwindled since the highs of a pandemic boom.

The Berlin-based group late on Monday said it had sold its approximate 4.5 per cent Deliveroo holding, or around 68mn class A ordinary shares, to institutional investors at a price of £1.13 a share. That is lower than Deliveroo’s closing share price on Monday of £1.219, which would have generated about £83mn for Delivery Hero.

“We can confirm that we have sold the entirety of our minority stake in Deliveroo,” Delivery Hero said. “We review all of our investments on an ongoing basis, and make decisions in line with our commitment to maintaining disciplined capital allocation.”

The proceeds would be used for “general corporate purposes”, said Delivery Hero. It will not hold any remaining shares in Deliveroo once the sale has gone through, it added.

The stake sale 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 give him extra voting powers — including the ability to block a hostile takeover.

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 higher inflation and rising interest rates culminating in a cost of living crisis.

Delivery Hero placed the shares with institutional investors through an accelerated bookbuilding process. It expects the sale to settle on Thursday.

Bradley Hughes, an analyst at Shore Capital, said Delivery Hero 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”.

DoorDash chief executive Tony Xu recently 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 Covid-19 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 initial public offering price of 390p. Some of the hit was immediate, with almost £2bn being wiped off its market value during the first day of trading in March 2021. The shares however have picked up more than 25 per cent in the past year.

Shares in Deliveroo slid 4 per cent in early trading on Tuesday while Delivery Hero shares fell 8 per cent, extending a more than 60 per cent drop over the past 12 months.

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 acted as joint bookrunners for Delivery Hero’s sale of Deliveroo shares.

Deliveroo declined to comment.