SHARES of UK food delivery company Deliveroo have surged after reports surfaced that US rival Doordash engaged in takeover talks with the firm, with analysts suggesting that other potential bidders might emerge in the coming weeks.
Doordash expressed interest in acquiring Deliveroo last month, but negotiations ended as the parties could not reach an agreement on the deal's valuation, according to Reuters.
The London-listed company’s share price rose by 6 per cent to 136p on Wednesday morning, closing 1.2 per cent higher at the end of the day, which valued the business at £2.1 billion.
Since its stock market debut in March 2021, Deliveroo’s value had plummeted more than 50 per cent. The highly anticipated flotation of this pandemic-era success story turned out to be a letdown, leading some traders to dub it “Flopperoo.”
Following the news, Doordash’s New York-listed shares initially dropped on Tuesday (25) but later recovered to close 1.25 per cent higher.
Delivery apps like Deliveroo thrived during the Covid-19 lockdowns when people were confined to their homes and restaurants were closed. However, demand for online food delivery has declined since then. Investors’ preference for more profitable businesses amid higher interest rates has also affected Deliveroo shares, analysts said.
The company collaborates with 180,000 restaurants and retailers and operates a network of 140,000 riders.
Amazon began investing in Deliveroo in 2019 and is its largest shareholder with a 13.2 per cent stake, followed by the Cayman Islands-based venture capital firm DST Global with 7.5 per cent, while Shu holds a 6.5 per cent stake. Amazon has previously been suggested as a potential buyer of Deliveroo.
Deliveroo has faced criticism for its treatment of its riders, who are not directly employed and are paid per delivery.
Both Deliveroo and Doordash declined to comment on the takeover discussions.
Deliveroo was founded by Will Shu in February 2013, alongside his childhood friend Greg Orlowski, the company says on its website.
