Delivery Hero Pours Cold Water on Talk of Counter-Bid for Rival

(Bloomberg) --

Delivery Hero SE Chief Executive Officer Niklas Oestberg poured cold water on speculation it may make a counter-bid for a U.K. food-delivery rival, saying the company has plenty of growth potential as it expands its offering to challenge Amazon.com Inc. in local shipments.

Interest in Oestberg’s acquisition strategy has risen since Peel Hunt analysts named the Berlin-based food delivery company as a possible counter-bidder for Just Eat Plc, which is in talks to be sold to Dutch delivery firm Takeaway.com NV for about $6.2 billion. Delivery Hero could benefit from the deal indirectly via its 15% stake in Takeaway.

“We do not need M&A and consolidation to be successful,” Oestberg said Tuesday in a phone interview with Bloomberg. A tie-up of Takeaway and Just Eat would have “very minimal impact” on Delivery Hero as the geographic overlap with them is small.

The stock rose as much as 2.5% and was up 1.5% at 2:10 p.m. in Frankfurt trading, increasing its gain for the year to 34%. Delivery Hero is Europe’s most valuable company in the burgeoning food-delivery sector, worth 8.2 billion euros ($9.2 billion).

“Takeaway is opportunistically buying scale for a cheap price,” said Giles Thorne, an analyst at Jefferies in London. “Delivery Hero has enough going on elsewhere with its investment plans.’’

Challenging Amazon

Rather than just focusing on restaurant meals, Delivery Hero is looking to challenge Amazon with fast transport of consumer items such as groceries and toiletries. The company offers broader delivery service in 12 markets and plans to raise that number in the coming months, Oestberg said.

In Istanbul, where Amazon has struggled to gain traction, Delivery Hero can reach customers in under 15 minutes on average and expects to reach a majority of the Turkish population by year-end, the CEO said. It’s also implementing membership programs in some of its markets to boost loyalty.

Delivery Hero exited the U.K. in 2016 after selling its operations there to Just Eat. It has since focused on expanding in fast-growing markets in the Middle East and Asia where it’s the leading provider. The company raised the number of active restaurants by 70% to 310,000 in 4,000 cities on growth in Asia and the Americas.

The strategy looks to be gaining traction. Delivery Hero doubled revenue in the second quarter to 315 million euros. The company also reaffirmed its financial guidance, which was raised in June.

Elusive Profits

Despite the potential merger of two competitors, “the likelihood for further cross-border M&A is low,” said Thorne. The more likely consolidation path in the sector lies in combining local operations in places like the U.S., Brazil and India, he said.

Even with the growth surge, profitability remains elusive as Delivery Hero spends on expansion. The company expects a full-year adjusted loss before interest, taxes, depreciation and amortization of between 370 million euros and 420 million euros.

While logistics margins are tough, “we’re not scared of that,” Oestberg said. “We want to become more of a ‘delivery everything’ business.”

To contact the reporter on this story: Stefan Nicola in Berlin at snicola2@bloomberg.net

To contact the editors responsible for this story: Giles Turner at gturner35@bloomberg.net, Chris Reiter

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