Deliveroo founder and chief executive Will Shu stands to gain more than £172 million if a proposed £2.7 billion takeover by US food delivery giant DoorDash goes ahead, despite the company’s shares still languishing far below their 2021 flotation price.
The board of Deliveroo announced after markets closed on Friday that it was “minded to recommend” the 180p-per-share approach from DoorDash, placing the FTSE 250 firm firmly in the spotlight ahead of Monday’s trading session. The American company, which first approached Deliveroo earlier this month, now has until May 23 to make a formal offer or walk away.
If completed at the proposed price, the deal would see Shu cash in on his 5.9 per cent stake in the business, having already sold shares worth nearly £15 million last September to fund personal property investments. However, for many early investors, the offer would crystallise heavy losses. Deliveroo’s £7.6 billion IPO in 2021 — the biggest London listing for a decade — was infamously dubbed a flop after shares plunged 26 per cent on the first day of trading. Shares closed at just 146.5p on Friday, down 62 per cent from the 390p listing price.
While the £2.7 billion proposal offers a 23 per cent premium to Deliveroo’s undisturbed share price, it represents a much smaller uplift compared to recent takeover activity in the sector. In February, Prosus paid a 63 per cent premium to acquire Just Eat Takeaway, despite that firm suffering from falling revenues and persistent losses. Deliveroo, by contrast, delivered a maiden pre-tax profit of £12.2 million last year and has shown revenue growth of 19 per cent since 2021.
The emergence of DoorDash’s interest is unsurprising in a market that has been consolidating fast, with scale increasingly critical for survival. DoorDash, which made its European debut by acquiring Finnish delivery platform Wolt in 2022, has no geographical overlap with Deliveroo — a factor likely to ease regulatory concerns.
Still, there remains the possibility of a rival bid. Amazon, which holds a 13 per cent stake in Deliveroo, could be a contender, although any move by the tech giant would face intense scrutiny from UK competition regulators.
DoorDash’s ambitions could see it develop Deliveroo’s platform beyond food delivery, following a similar strategy in the US where it sells products from brands such as Sephora. Deliveroo has already begun diversifying, partnering last year with the likes of B&Q, Screwfix, and Not On The High Street.
While Deliveroo’s growth has slowed post-pandemic — with revenue up just 3 per cent last year compared to 57 per cent in 2021 — analysts believe the company remains a valuable asset. Research from Jefferies suggests DoorDash could justify paying up to 230p per share without damaging its free cash flow, fuelling hopes that Deliveroo’s board could negotiate a higher price.
For now, Deliveroo shareholders are advised to take no action as the takeover discussions continue. However, with DoorDash keen to accelerate its European expansion and Deliveroo offering instant access to major urban markets, a deal — whether at 180p or higher — appears increasingly likely.
