DoorDash, UK's Deliveroo serve up $3.9 billion deal to take on rivals

By Pushkala Aripaka

(Reuters) -U.S. meal delivery firm DoorDash will buy Deliveroo in a deal valuing the British rival at about 2.9 billion pounds ($3.85 billion), the companies said, banking on a bigger reach and local expertise to take on competition.

The groups rekindled talks last month after DoorDash approached Deliveroo with a 180 pence per share proposal, which was confirmed on Tuesday as the final offer, sending Deliveroo shares up about 2%.

Still, at Tuesday's high of 176.4 pence, the stock was trading under the offer price. Deliveroo's shares have struggled since their debut when they were sold at 390 pence in 2021, a time when meal delivery services were boosted by the pandemic.

The acquisition will help DoorDash grow its market share in Europe, competing against Just Eat and Uber Eats, as it adds Deliveroo's largest market, Britain and Ireland to its roster, along with others. DoorDash shares were down about 2% in U.S. pre-market trading.

In 2024, Deliveroo and DoorDash had orders worth about a combined $90 billion, the companies said, with roughly 7 million and 42 million monthly active users, respectively. 

"Following careful consideration, the Deliveroo Independent Committee has unanimously decided to recommend this offer, considering it to be in the interests of all our shareholders and wider stakeholders," its Chair Claudia Arney said in a statement.

Jefferies analysts said the recommended final offer, came "well ahead" of a May 23 deadline for DoorDash to make good on its initial proposal, "suggesting that the engagement to date had been more substantive than originally signalled".

INVESTOR SUPPORT

San-Fransisco-based DoorDash, which provides a restaurant delivery service through a mobile application, said it would not increase its offer, but reserved a right to do so if a third party emerged with a competing offer for Deliveroo.

Deliveroo said it has received undertakings of support from investors holding about 15.4% of shares, including from co-founder and chief executive Will Shu, and investment firms Greenoaks and DST Global.

For the deal to go through, Deliveroo will need approval of at least 75% of shareholders.

Panmure Liberum analysts highlighted "the notable absence" of Deliveroo's largest shareholder, Amazon, from this list, adding that they still see Amazon as the most likely counter-bidder.

Amazon, which has a 14.38% stake in Deliveroo, did not immediately respond to a Reuters request for comment.

The deal is not expected to face regulatory hurdles, as DoorDash has virtually no presence in Deliveroo's 10 markets, a source told Reuters last month.

Shu, who co-founded Deliveroo in 2013 with his childhood friend Greg Orlowski, would receive about 172.4 million pounds for his 6.4% stake, the third largest.

Previous negotiations with DoorDash had ended in disagreement over Deliveroo's valuation, Reuters reported last year.       

($1 = 0.7526 pounds)

(Reporting by Anuja Bharat Mistry, Pushkala Aripaka and Yamini Kalia in Bengaluru, and Milana Vinn; Editing by Eileen Soreng, Kirsten Donovan and David Evans)