UK food delivery service Deliveroo gains on news of acquisition by DoorDash

Today, May 6, quotes on Deliveroo, a small-cap food delivery company based in the UK, have climbed 2.5% on the London Stock Exchange to their highest level in over two years. These gains came after it was announced that the company would be acquired at a premium by DoorDash, the largest player in the U.S. food delivery market with a market capitalization on the Nasdaq of more than $87 billion. Analysts say the merger poses a threat to Uber’s position in the UK market.

Today, Deliveroo has gained 2.5% on the LSE to GBX176.4 per share (GBP1.76), its highest level since late January 2022, while DoorDash has tumbled almost 4% in premarket trading in New York.

Today’s gains for Deliveroo came after DoorDash, the largest food delivery service in the U.S., announced an agreement to acquire Deliveroo. Deliveroo’s board has recommended that shareholders approve the deal.

Under the terms of the deal, all issued and to-be-issued ordinary shares of Deliveroo are valued at GBP2.9 billion ($3.86 billion at the current exchange rate), or GBX180 per share, roughly 44% above the closing price on April 4 — the last business day before DoorDash sent its acquisition offer. The offered price is also above current quotes: Deliveroo closed at GBX172.1 per share yesterday, May 5.

However, as the Guardian points out, the announced valuation is less than half Deliveroo’s IPO price. In 2021, the company went public at GBX390 per share before plunging 26% on its first day of trading.

The companies plan to close the deal in the fourth quarter, pending approval by Deliveroo shareholders.

DoorDash, which controls two thirds of the U.S. restaurant delivery market, aims to strengthen its global presence, Bloomberg says. It currently operates in over 30 countries, and the Deliveroo acquisition will expand its footprint to more than 40. According to the press release, the combined company is expected to serve around 50 million monthly active users.

In 2024, Deliveroo generated GBP2.0 billion in revenue versus DoorDash’s $10.7 billion, the U.S. company said.

The acquisition will triple the size of DoorDash’s non-U.S. business without overlapping with its Finnish subsidiary Wolt or raising antitrust concerns, according to Bryan Garnier analyst Clement Genelot, as cited by the Wall Street Journal.

The BBC notes that this deal is another example of a London-listed company being acquired by a U.S. firm, which raised “new questions” for the LSE and further concerns over how attractive the UK is for investment.

Hargreaves Lansdown senior equity analyst Matt Britzman told the BBC that DoorDash was seeking to “squeeze out” rivals in the UK and that the merger with Deliveroo could pose a serious challenge to Uber. “The deal... could turn the UK market into a fierce two-horse race with DoorDash and Uber at the top,” he said.