American company DoorDash Inc. has reached an agreement to purchase the British delivery platform Deliveroo Plc for approximately £2.9 billion ($3.9 billion). This acquisition represents a crucial step in DoorDash’s expansion strategy into foreign markets and significantly strengthens its position in the global food delivery industry, which is undergoing intensive consolidation following the growth slowdown from the pandemic period.
Transaction Details
DoorDash offered 180 pence in cash for each Deliveroo share, as confirmed in a Tuesday statement. This offer represents a 29% premium compared to Deliveroo’s closing share price the day before the announcement. Deliveroo’s board has agreed to the terms, though the transaction still requires regulatory and shareholder approval.
- Together, the companies will have a gross order value of approximately $90 billion annually
- The combined user base consists of 50 million monthly active users
- Investors representing 15.4% of Deliveroo shares, including CEO Will Shu, have already agreed to sell
- The deal requires approval from owners representing 75% of Deliveroo shares
Deliveroo’s share price has significantly declined since its IPO in 2021, when shares were priced at 390 pence. At its peak, the company was valued at more than £7 billion, but its value dramatically decreased following growth slowdown after the end of COVID lockdowns. This attracted activist fund Sachem Head Capital Management, which acquired a stake in the British company due to its undervaluation and potential to become an acquisition target.
DoorDash’s Global Ambitions
DoorDash, which controls two-thirds of the restaurant food delivery market in the US, will expand its reach to more than 40 countries with this acquisition. CEO Tony Xu emphasizes that the main goal is to strengthen the company’s presence abroad.
- The company already operates in 28 countries outside the US, primarily in continental Europe, Japan, and Australia
- However, it doesn’t enjoy the same brand recognition in any of these markets as it does in the US
- Most of DoorDash’s foreign markets are in sparsely populated European countries like Sweden, Estonia, Denmark, and Iceland, which it entered through the purchase of Finnish company Wolt Enterprises two years ago
“We’re not very well penetrated in any one of those countries,” Xu said in an interview. “The growth is there, and our unit economics are improving, but we have a long way to go when it comes to matching the penetration levels of our US marketplace.”
Competitive Environment and Strategy
Europe’s largest food delivery companies, including Deliveroo, Germany’s Delivery Hero SE, and Turkish startup Getir, face pressure from investors to prove profitability as delivery demand has declined from pandemic levels. Across the industry, companies that promised ultra-fast delivery of everything from groceries to medications in Europe are cutting costs and consolidating.
In addition to foreign markets, DoorDash is also investing in its non-restaurant services, such as grocery delivery:
- The company recently announced a partnership with Royal Ahold Delhaize NV, owner of the Stop & Shop and Hannaford chains
- The agreement will bring nearly 2,000 Ahold Delhaize grocery stores on the US East Coast onto DoorDash’s delivery platform
- The service targets a new type of customer who might add several convenience store items to a restaurant food order
- DoorDash’s three-year-old grocery delivery business doubled its gross order value in the third quarter of last year
“We believe that the partnerships we’ve created with Instacart and now DoorDash really extend that customer base and gain a level of incremental sales for us,” said JJ Fleeman, CEO of Ahold Delhaize USA.
Future Outlook
The Deliveroo acquisition is part of a broader consolidation trend in the industry, as seen in February when Prosus NV agreed to buy Amsterdam-based Just Eat Takeaway.com NV. Food delivery companies are being forced to merge after rapid acceleration during the coronavirus pandemic lost momentum in subsequent years.
DoorDash shares in New York strengthened by 1.8% following the announcement and have risen 16% since the beginning of the year. Meanwhile, Deliveroo shares rose 2.2% to 175.80 pence in London trading. DoorDash stated that its offer is final and will not be increased unless another bidder expresses interest in the British company.
For both companies, this deal represents a strategic move in a competitive environment where a new generation of global players with deep pockets are now competing for customers across borders.
