Food delivery app Deliveroo (ROO.L) is being snapped up by US rival DoorDash (DASH) in a takeover deal worth £2.9 billion.
The two firms said they will merge to cater to about 40 countries around the world with a combined population of one billion people.
It is also the latest example of a UK-listed business leaving the London Stock Exchange and being taken over by a US firm.
Here, the PA news agency looks at what the takeover will mean for customers, staff, and the London stock market.
– What has been agreed?
San Francisco-based DoorDash has agreed to acquire Deliveroo, which is currently listed on the London stock market.
DoorDash has offered 180p a share in cash for the delivery firm, valuing it at around £2.9 billion.
The deal is expected to complete between October and December this year but will need to be approved by Deliveroo’s shareholders.
DoorDash operates in about 30 countries (DoorDash/PA)
– What is DoorDash?
DoorDash is one of the world’s largest local commerce platforms with more than 42 million customers in 30 countries, delivering to homes across urban, suburban and rural areas.
It is a similar business to Deliveroo, having been founded in 2013 and starting out as a food delivery company, before expanding its offering beyond takeaways to things like groceries, flowers, and pharmaceuticals.
However, it has grown to be much bigger than its UK-based competitor and offers a wider range of services including technology, logistics, and campaigns for merchants and small businesses.
DoorDash has its shares publicly listed on the US’s Nasdaq (^IXIC) index and has a market capitalisation of about 93 billion US dollars (£70 billion) – compared with Deliveroo’s £2.2 billion.
Nevertheless, Deliveroo operates in nine countries that DoorDash currently does not – the UK, Belgium, France, Italy, Ireland, Kuwait, Qatar, Singapore, and United Arab Emirates.
Deliveroo operates in nine countries that DoorDash currently does not (Deliveroo/PA)
– What does it mean for customers?
The firms have said it is too early to say what the takeover will mean for the Deliveroo brand, including whether or not the name will be kept when it merges with DoorDash.
Deliveroo has built a recognisable brand in the markets it operates, with its popularity surging during a pandemic boom in home deliveries, and as it grew its roster of delivery partners including restaurants, supermarkets, and retailers.
Until the acquisition goes ahead, nothing is expected to change for customers.
However, the firms have said the tie-up will bring new countries to DoorDash’s network, while Deliveroo will benefit from the US firm’s size and scale, allowing it to invest more in products, technology, and the customer experience.
Will Shu, Deliveroo’s co-founder and chief executive, said the deal marks the “beginning of a transformative new chapter” for the company which will see it join up with a “like-minded” business.
– What does it mean for staff?
DoorDash is expected to kick-start a six- to 12-month review of the merged group once the deal completes.
It said that, while it is too early to confirm the exact changes that will be made, it expects a potential reduction of around 1% to 3% of the combined workforce, largely in general administrative and business support roles.
But the firms stressed that DoorDash does not plan to make major changes to Deliveroo’s London headquarters.
The buyer also confirmed it will honour the agreement between Deliveroo and the GMB trade union – which represents the firm’s drivers and riders.
Deliveroo’s co-founder and chief executive, Will Shu, said the deal marks a ‘transformative new chapter’ for the company (Deliveroo/PA)
– What has been the reaction to the deal?
The sale follows a chequered time for Deliveroo since it listed in London four years ago, raising £7.6 billion during the flotation.
Its share price immediately dropped after the launch, and is now about half the value it was at its peak in 2021.
Kathleen Brooks, research director at XTB, said the deal has been a “long time coming”, adding that it is “good news for short-term holders of Deliveroo shares, but it is still a blow for those who have been holding the shares since the IPO (initial public offering)”.
“Deliveroo’s sale is the end of the road for one of the most hyped IPOs in the UK in recent memory, which ended up promising more than it could deliver,” she said.
Russ Mould, investment director at AJ Bell, said there has been “widespread consolidation” in the food delivery market, with a number of tie-ups announced recently.
“We’re now in the phase where only the strongest will survive and they’re the ones picking up smaller rivals who realise their future is best part of a bigger entity, not going it alone,” he said.
– What does it mean for the UK?
Deliveroo joins a growing roster of London-listed companies being taken over by US firms.
It will join the likes of Morrisons, Hotel Chocolat, cybersecurity firm Darktrace, cinema chain Curzon, and others which have been snapped up by US-based buyers in recent years.
The trend reflects buyers swooping in to acquire UK-listed companies when their shares are cheaper, often helping them get bigger or pick up smaller competitors.
The Government has been accelerating efforts to drive more investment into UK businesses, including reforms designed to make listing on UK stock markets more attractive.
