Home Estate Planning Deliveroo approach from Doordash failed but analysts say it ‘may only be the start’

Deliveroo approach from Doordash failed but analysts say it ‘may only be the start’

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A takeover approach of fast food delivery giant Deliveroo by Doordash seemed to have failed, but analysts warn it may well still happen in the future.

This comes after Reuters reported that Doordash and Deliveroo held talks last month, but the possible deal ended over a disagreement on valuation.

No talks are ongoing, according to the publication.

This comes comes after Europe and the US’s top online food delivery companies collectively lost over $20bn (£15.6bn) in operating losses over the past seven years as the stocks languish.

In April, Deliveroo said its takeaway service made a small amount of progress in the first quarter of 2024 amid a more stable consumer environment in the UK. It posted a six per cent rise in gross transaction value (GTV) to £1.83 bn, up from £1.75bn in the first three months of 2023.

Deliveroo, which has long been seen as a target for a merger or acquisition, may not have agreed to a deal on this occasion, but analysts at Jefferies said the approach “may only be the start”.

In a note put out following the report of an approach, analysts said the talks “validate what we have been arguing” since December, that a “large gap in US vs. Europe trading multiples will be a catalyst for the return of cross-border M&A in online food delivery in 2024”. It also said the talks show “Deliveroo’s quality of market positions, strategy, execution and balance sheet” which make it such a highly-sought after target.

“In this instance, the talks have failed. But such is the strength of the financial, industrial and strategic logic of a Deliveroo takeover, we would not be surprised to see similar such headlines to re-emerge in the short term.”

Jefferies said: “In our view, the key to unlocking a recommended offer from Deliveroo is understanding the sensibilities of the Founder CEO, Will Shu. This may only be the start.”

Following reports of the talks, Deliveroo, which is listed on the London Stock Exchange, saw its share price shoot up. Last night just before the close its shares were valued at 128p, and they opened at 132p this morning. After the open they were more than three per cent up.

In the last six months however, Deliveroo’s shares have been broadly flat, though they are up 23.81 per cent in the last 12 months.

Deliveroo declined to comment.

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