DoorDash has agreed to buy the food delivery company Deliveroo for £2.9 billion, ending Deliveroo’s difficult time since going public in the UK. DoorDash, based in San Francisco, will pay 180p per share in cash for Deliveroo, which has struggled since its £7.6 billion valuation four years ago.
This deal means Deliveroo will become another UK company taken over by a US rival, which is a setback for the London market and the UK tech industry.
Deliveroo, which has a food delivery app operating in nine countries, has faced tough competition from rivals like Uber Eats and reported its first full-year profit in March. The food delivery industry is seeing more consolidation, as companies believe being larger will help them grow.
Earlier this year, Prosus, the European investment arm of South African company Naspers, made a €4.1 billion deal to take Europe’s largest food delivery group, Just Eat Takeaway, private.
Deliveroo and DoorDash announced their boards have finalized the cash deal. DoorDash mainly works in the US, Canada, Australia, and New Zealand, and its business does not compete with Deliveroo.
Deliveroo was founded in 2013 by CEO Will Shu. The Financial Times previously reported that DoorDash believed the lack of overlap would help the deal avoid being blocked by regulators.
DoorDash has expanded internationally, notably with a €7 billion stock deal for Finnish delivery app Wolt in 2021. The company operates in over 30 countries. On the same day, DoorDash announced plans to buy restaurant booking platform SevenRooms for $1.2 billion.
This move is part of DoorDash’s strategy to strengthen its position in food delivery and restaurant services. The SevenRooms deal will be in cash and is expected to close in the second half of the year.
Shares in DoorDash dropped more than 9% in early trading in New York after the announcements. Deliveroo’s acquisition by DoorDash marks the end of a tough period as a UK-listed company: Deliveroo’s shares fell sharply after its 2021 initial public offering and never bounced back.
Despite these challenges, Shu stated he was “really proud” of what the company achieved while public and saw the DoorDash deal as “the beginning of a transformative new chapter.” DoorDash is around 30 times larger than Deliveroo based on market value.
Shu noted that the larger company will be able to invest more in product development, technology, and overall customer experience. No decisions have been made yet about his role in the new company or any branding updates.
Tony Xu, CEO and co-founder of DoorDash, said this deal will combine “DoorDash’s strong operating playbook with Deliveroo’s local expertise.” Both companies are expanding into grocery and retail delivery and are growing their advertising businesses to improve profits.
Sean Kealy, an analyst at Panmure Liberum, mentioned that DoorDash’s plan to invest more in Deliveroo shows it wants to “support competitiveness in its markets.” He said this is a clear sign that DoorDash aims to accelerate growth through this acquisition. DoorDash also announced its SevenRooms deal along with first-quarter earnings.
DoorDash reported a gross order value—total transactions on its platform—of $23.1 billion, slightly above estimates of $22.9 billion.
Revenue reached $3.03 billion, just below analysts’ expectations of $3.1 billion, but DoorDash reported a net income of $193 million, exceeding the consensus of $169 million.
The company forecasts a gross order value between $23.3 billion and $23.7 billion for the second quarter, slightly above market projections of $23.3 billion.