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Deliveroo shares soar as German rival sparks takeover speculation

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Deliveroo - Reuters
Deliveroo - Reuters

A £300m stake in Deliveroo has been snapped up by a German rival, sending the takeaway app's shares surging to their highest level since the company's disastrous stock market float amid hopes it will be swept into a wave of industry dealmaking.

Shares in Deliveroo rose as much as 11pc after the business disclosed that a 5.09pc holding had been built up by Delivery Hero, a £27bn competitor based in Berlin.

The stock closed at 339.8p, up 4.5pc - the first time shares have had surpassed the 331p at which they were valued when trading opened on March 31. They remain far below the 390p price which the first investors paid during Deliveroo's calamitous float.

Niklas Oestberg, Delivery Hero’s chief executive, said he had invested in the company because it was “undervalued” and had been “oversold at IPO”.

While a takeover offer is not thought to be on the horizon, the German company's stake raises the prospect that Deliveroo could be an acquisition target in a food delivery industry that has boomed during the pandemic.

One Deliveroo investor said Delivery Hero’s investment is a welcome sign and that industry consolidation is inevitable, adding “there has to be rolling up” in the industry.

DoorDash, America's biggest food delivery company, is in talks to invest in German grocery delivery start-up Gorillas. Meanwhile, Uber has bought US rival Postmates and Amsterdam-headquartered Just Eat Takeaway has completed a $7.3bn (£5.3bn) takeover of Grubhub.

Mr Oestberg indicated that Delivery Hero - which operates in about 50 countries across four continents - had opportunistically invested, sensing a bargain after Deliveroo’s shares crashed more than a third from their float price.

On Twitter, he said: “I know [Deliveroo chief executive] Will Shu for many years and I’m holding a huge respect for what he and his team have built. Company being oversold at IPO … Felt undervalued to us.”

Mr Oestberg added that the company is not buying more shares at present.

Deliveroo’s £7.6bn float was the biggest in the UK for a decade and had raised hopes that the London Stock Exchange could attract the high-growth technology companies that have traditionally flocked to America. However, shares fell by 26pc in one of the worst major debuts in UK history.

Mr Shu has control of Deliveroo and would have the last say on any deal because of a special share structure that gives him 57.5pc of its voting rights despite a stake of just 6.4pc. He has previously fended off takeover interest from Uber and Amazon, which has an 11.9pc stake.

Deliveroo, which operates in 12 markets and is in the process of pulling out of Spain, competes against Delivery Hero in the United Arab Emirates, Hong Kong and Singapore.

Giles Thorne, an analyst at Jefferies, suggested that any tie-up between the two would be seen as an opportunity to dominate in rapid grocery delivery, a growing area for food delivery companies. Deliveroo has a partnership with Waitrose which the grocer's boss, Dame Sharon White, has hailed as a key part of her turnaround strategy.

Mr Thorne said that Delivery Hero could bring Deliveroo valuable expertise in so-called dark stores, hubs for grocery deliveries which only serve couriers.

He added: “Convenience grocery is the next big category ready to migrate from offline to online. Both companies are first movers on a model that works. And so there is a strong strategic alignment there."

While Mr Shu’s voting control of Deliveroo, which expires after three years, would make it impossible to mount a takeover without his blessing, Mr Thorne said it could also be easier for him to push through a deal he does support.

Delivery Hero’s largest shareholder is Naspers, the South African internet giant that last year lost a bidding war with Takeaway.com for Just Eat through its Dutch subsidiary Prosus.

The company also owns stakes in Just Eat Takeaway and Spain’s Glovo.

Mr Oestberg said the company had invested in Deliveroo at an average share price of 270p, an outlay of about £236m. Its share price puts the stake at just over £300m.