Is DoorDash Planning To Gobble Up Europe? Company Strikes $3.9 Billion Deal To Buy UK Food Delivery Company Deliveroo
DoorDash (NASDAQ: DASH) is synonymous with food delivery in the U.S., and now it appears the company is positioning itself to take on the European market.The delivery giant has announced it will acquire U.K.-based Deliveroo in a $3.9 billion deal. U.K.-based Deliveroo is like DoorDash in that it is one of the most recognizable names in its geographic market.
The deal, which Reuters says both sides have been working on for the last several months, is indicative of a changing landscape in the food delivery business. According to Reuters, the sector has been struggling due to several factors. First, inflation and increased costs have forced consumers to tighten their belts, and dialing back on luxuries like dinner delivery is an easy way to cut expenses. Second, there is an overabundance of competitors in the sector.
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The two obstacles to profit have created an environment where consolidation is much more likely. AJ Bell Investment Director Russ Mould told Reuters he believes the entire sector has been weakened by an oversaturation of delivery services competing for the same customers. That kind of climate inevitably means that some food-delivery services operating today will not survive the current downturn.
'Only the strongest will survive, and they're the ones picking up smaller rivals who realize their future is [the] best part of a bigger entity, and not going it alone,' he said.
DoorDash may have gotten a good deal on the final price. According to Reuters, Deliveroo shares are trading on the London Stock Exchange for less than half of their 2021 IPO price. Deliveroo CEO Will Shu, who delivered meals himself during the company's formative years, was philosophical about the current business climate and its effect on the company's share price.
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'That was a different time, (and) a different interest rate environment," Shu told Reuters. He was optimistic about Deliveroo's long-term future, but also very aware of how much competition his company was facing. 'The board and myself evaluated that and said, 'Where do we think Deliveroo should be in order for us to truly win?' And we thought this was the right place for us,' he said.
Shu's analysis illustrates the reality of being a CEO of a company. You have a duty to your shareholders and investors to do what's best for the company, even if that means being acquired at a relative discount by a larger company. With that said, it's not all bad news for Shu. Reuters estimates that he will receive roughly $215 million for his Deliveroo shares.
"I could not be more excited by the prospect of what DoorDash and Deliveroo will be able to accomplish together," said DoorDash CEO Tony Xu. " 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." Reuters estimates the two companies did roughly $90 billion in delivery orders in 2024.
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This article Is DoorDash Planning To Gobble Up Europe? Company Strikes $3.9 Billion Deal To Buy UK Food Delivery Company Deliveroo originally appeared on Benzinga.com
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