Deliveroo’s share price jumped on Wednesday on the back of reports that US rival Doordash held takeover talks with the British delivery company.
Doordash flagged an interest in a takeover of Deliveroo last month, but talks ended because the two sides could not agree on the value of the deal, according to Reuters.
The news agency said San Francisco-based Doordash made the approach but the talks ended after disagreement on valuation. There are no talks ongoing, Reuters added.
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Deliveroo’s shares rose as much as 6% to 135 pence on Wednesday morning following the news. CEO Will Shu founded Deliveroo in February 2013, alongside his childhood friend Greg Orlowski.
Further takeover talks may come
Analysts at the financial services company Jefferies said: “In this instance, the talks have failed. But such is the strength of the financial, industrial and strategic logic of a Deliveroo takeover, we would not be surprised to see similar headlines to re-emerge in the short term.
“In our view, the key to unlocking a recommended offer from Deliveroo is understanding the sensibilities of the founder CEO, Will Shu. This may only be the start.”
The takeaways and grocery delivery group is on track to make its first ever profit, after seeing its annual pre-tax losses tumble from £230.6 million to just £10.9 million in 2023. Deliveroo has yet to make a profit since it was founded 11 years ago.
Its first few years were challenging, but the pandemic changed everything. With most restaurants forced to close, stuck-at-home consumers had no choice but to order their meals through platforms like Deliveroo, Uber and Just Eat Takeaway.com.
Deliveroo’s motto is 'proper food, proper delivery’, but it has been diversifying into other markets to increase options for users.
A user in London opening the app today can order a range of products including fresh bread, alcohol, toiletries, condiments, pet food and even tobacco products, all to be delivered within 20 minutes. The firm is continually increasing the number of options on the platform in London and other regions.
Trouble is, the business is bleeding cash in the form of marketing costs. It is battling its main rivals, Uber Eats and Just Eat for market share, and the fight for eyeballs shows no sign of calming.
What is more, Deliveroo and its peers rely heavily on “gig economy” labour. Pressure is only set to keep growing on them to increase pay and benefits for their workers. The firm is already having to work hard to retain and attract new riders in a tight labour market, only adding pressure to its finances.
Doordash, which has a $46 billion market value, had previously considered buying Deliveroo in 2022, the Sunday Times reported.
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