How Deliveroo ended up in DoorDash’s basket

Deliveroo has caught the eye of its US rival DoorDash, with the delivery giant submitting a £2.9bn takeover bid.

The 180p-per-share offer was recommended by shareholders earlier this week and will see co-founder and chief executive Will Shu in line for a £172m payout if the deal goes ahead. Deliveroo staff are also set to receive a near £66m windfall.

While the offer represents a 44% premium on its share price as of 4 April when it first tabled an offer, it’s just over a third than the £7.6bn it was valued at when it flotated in 2021.

City broker Panmure Liberum analyst Sean Kealey notes that Deliveroo has become more vulnerable as an acquisition target  because it “hasn’t been able to scale as much and has been left a lot smaller than most global competitors”.

Deliveroo, which was founded in 2013, posted its first annual profit last year of £3m, up from a £32m loss, as sales topped £2.01bn.

The company attributed part of the growth to its Deliveroo Shopping proposition, which launched in 2023 and sees the platform partner with retailers to provide speedy delivery for products across grocery, DIY, beauty and fashion.

It counts the likes of Ann Summers, Boots, B&Q, Hurr and Wilko among its partners, as well as some of the UK’s biggest grocers in Sainsbury’s, Waitrose, Morrisons and Co-op.

Retail Gazette takes a look at who is Deliveroo’s potential new US-based owner and what it wants with its UK rival?

What is DoorDash?

DoorDash, which was founded in 2013, raked in £8bn ($10.7bn) in sales last year across the 30 territories that it operates.

Similar to Deliveroo, the platform works with restaurants and retailers including Walgreens, JD Sports, Home Depot and boutique David’s Bridal to provide instant delivery services to over 42 million monthly active users.

Kealey explains that Deliveroo’s “very strong market share positions in city centres” across the UK and more specifically, in London, which has made it an appealing takeover target for DoorDash to build a presence in Britain. Doordash also has no presence in the eight other territories Deliveroo operates in, which Ireland, Italy, France and the United Arab Emirates.

Commenting on the possible deal, DoorDash co-founder and chief executive Tony Xu said: “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.”

Xu added that the new group “will bring together DoorDash’s strong operating playbook with Deliveroo’s local expertise to invest in innovation and execution at an even higher level”.

Deliveroo is not the first acquisition the US tech firm has made to grow its foothold in the European market, with the company snapping up Finnish based rapid delivery platform Wolt for €7bn back in 2022.

The firm also is also currently finalising its acquisition of New York City-based hospitality software provider SevenRooms.

Is Deliveroo’s takeover a done deal?

The takeover bid still needs to be approved by shareholders and analysts will be keeping an eye out to see how Amazon, Deliveroo’s biggest shareholder, will react.

The online retail giant, which owns 14% of the company, has remained tight-lipped on its intentions with Deliveroo and raises the question of whether it could launch a rival offer.

Kealey is hesitant that Amazon may react to the takeover bid with its own counter offer after its initial £440m investment in the platform back in 2019 raised concerns from the UK’s competition regulator.

While there’s no certainty that Deliveroo will attract another offer, Kealey says one “would most likely” come from Amazon.

If the DoorDash merger is approved by shareholders, it’s not clear whether the new owner will rename Deliveroo. However, it’s worth noting that Wolt has kept its branding post acquisition.

The US delivery giant confirmed it will launch a six to 12-month review of the new merged group once the sale has finalised.

DoorDash said it was too early to confirm the exact changes but it expects a potential reduction of around 1% to 3% of the combined workforce, consisting mainly of general administrative and business support roles.

It said: “It is anticipated that efforts will be made to mitigate the need for redundancies through the standalone growth of the enlarged group, natural attrition, and the slowing or pausing of select hiring plans, and redundancies at Deliveroo are not expected to be material”.

The US giant plans to leverage its own operating playbook “to accelerate business performance at Deliveroo including with Deliveroo’s existing growth initiatives, loyalty programmes, grocery and retail offering, and advertising”.

The UK delivery platform has proven its tie-up with supermarkets is worthwhile growth venture, with grocery sales up double-digits and representing 16% of the group’s gross transaction value (GTV) in the second half of last year.

Kealey notes Deliveroo’s Shopping proposition shows promising signs, despite it coming from a relatively small base.

The platform said it had made “good progress” on building its offer in key target categories across DIY, health and beauty, pet care and flowers. By the end of 2024, Deliveroo had 2,500 retail sites listed on its app – compared to the more than 100,000 non-restaurant stores listed on DoorDash in North America.

Quick commerce is a rapidly emerging go-to-market channel for retailers, with Tesco boss Ken Murphy reporting its instant delivery Whoosh service has been “a real success story” and a key growth driver for the grocery giant.

Deliveroo’s takeover will represent a blow to the City of London following the loss of another tech-focused player, but the fresh investment could be just what the firm needs – and it seems its new US owner will likely ramp up its offering with retailers.

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