Deliveroo stock rises after German rival got involved in the deal

A Deliveroo courier travels down Regent Street delivering takeaway food in central London during Covid-19 Tier 4 restrictions.

Pietro Recchia | SOPA pictures | LightRocket via Getty Images

LONDON – Shares in grocery supplier Deliveroo rose over 10% on Monday after the company announced that larger German rival Delivery Hero has acquired a 5.09% stake in the company.

The company’s stock rose from £ 3.36 ($ 4.66) per share to £ 3.60 per share in early trades on the London Stock Exchange on Monday, the highest since trading began in March. Meanwhile, Delivery Hero shares on the Frankfurt Stock Exchange remained relatively unchanged.

Deliveroo’s market value is around £ 8 billion, so Delivery Hero’s investment appears to be around £ 400 million. Deliveroo declined to comment on the exact amount of the investment, while Delivery Hero did not immediately respond to a CNBC request for comment.

In a notice to investors, Deliveroo announced that Delivery Hero would sell it after the market closed on March 6.

Founded in 2013 by Will Shu and Greg Orlowski, Deliveroo received a boost from Amazon in 2019 when the e-commerce giant launched a $ 575 million funding round into the company.

On 2020 sales of £ 4.1 billion, the company made a loss of £ 223.7 million.

Deliveroo went public in March and while trading got off to a bumpy start, the company’s share price has since rebounded somewhat.

Delivery Hero’s investment comes in the midst of a period of consolidation in the food delivery market.

Deliveroo, headquartered in London, and Delivery Hero, headquartered in Berlin, are two of the largest food suppliers in Europe and have been battling for market share in countries across the continent and beyond for almost a decade.

Delivery Hero, which is significantly larger than Deliveroo with a market capitalization of around 30 billion euros ($ 35 billion), also has minority stakes in food suppliers like Glovo, Just Eat Takeaway, Rappi, and Zomato.

It competes with Deliveroo in the Middle East through its Talabat business and in Hong Kong and Singapore through its Foodpanda divisions.

However, Deliveroo and Delivery Hero do not compete in the UK, which is Deliveroo’s main market. That’s because Delivery Hero sold its UK business Hungryhouse to Just Eat for around £ 200m in 2016.

Like UberEats and DoorDash, Deliveroo and Delivery Hero rely on an army of self-employed couriers to deliver groceries from restaurant kitchens to homes and offices in cities around the world in around 30 minutes while cutting down on each order.

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