Deliveroo's Stock Soars 17% on DoorDash Takeover Proposal Valued at £2.7bn
Stock prices for Deliveroo escalate by 17% in anticipation of a potential £2.7 billion acquisition.
In a buzzworthy turn of events, shares in meal delivery giant Deliveroo have seen a significant jump by 17% following news of a potential £2.7 billion takeover by US rival DoorDash.
After the market closed last Friday, Deliveroo disclosed that talks with DoorDash had been ongoing since 5th April, with an 180p per share offer suggested, although the finer details are yet to be agreed upon.
This deal, if accepted, would put Deliveroo founder and CEO Will Shu in line for a cool £170m payday. Just before trading on Monday, Deliveroo revealed it had halted its £100m share buyback program, until further notice. The opening share price reaction saw the stock climb to 171p per share - just shy of the proposed offer - and far under the £3.90 per share IPO price in 2021.
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Despite Deliveroo's share price woes since its market debut, weakening nearly 50%, this deal is expected to bypass regulatory hurdles as it brings DoorDash access to 10 new markets where they currently have no presence.
However, if the deal goes through, it may signal a setback for the City of London, potentially losing a tech-focused player from its ranks. Susannah Streeter, head of money and markets at Hargreaves Lansdown, pointed out that even with Deliveroo achieving profitability, its share price struggles have persisted.
According to Streeter, intense competition and the post-pandemic dip in demand have been major challenges for Deliveroo. Despite their foray into grocery deliveries, they're still grappling with stiff competition. Streeter also expressed concerns over the government's efforts to bolster London's tech sector. If Deliveroo departs the London Stock Exchange, it would join the list of companies leaving, leaving insufficient IPOs to compensate.
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Key Points to Consider on the Proposed Deliveroo-DoorDash Deal:
- Talks Timeline: Discussions between Deliveroo and DoorDash have been ongoing since April 5th. Deliveroo announced that they are "minded to recommend" the deal to shareholders if formal terms are agreed upon [1][2].
- Offer & Shareholding: The proposed offer is 180p per share, potentially resulting in Will Shu receiving a £172 million payout based on his 5.9% shareholding [1].
- Competitors’ Interest: Other major shareholders include Amazon (13.7%) and Delivery Hero (about 5%), neither of whom are considered as blocking shareholders [2].
- Implications: If the deal goes through, Deliveroo will pause its £100 million buyback program [1]. The company has launched a new rapid delivery solution, Deliveroo Express, to bolster its grocery offerings [1].
- Advisory: DoorDash is being advised by JPMorgan on the deal [2].
- The proposed takeover of Deliveroo by DoorDash, valued at £2.7 billion, has led to a significant increase in shares for the meal delivery giant.
- If the deal is finalized, Deliveroo founder Will Shu could receive a £170m payday, according to the suggested 180p per share offer, and the company would pause its £100m share buyback program.
- The potential loss of Deliveroo from the London Stock Exchange could affect the government's efforts to strengthen the tech sector in London, as it may leave insufficient IPOs to compensate.
- The deal could signal a setback for the City of London, as it brings DoorDash access to 10 new markets, potentially weakening competition in these areas.
