DoorDash to Buy Finnish Delivery App Wolt for $8 Billion
(Bloomberg) -- DoorDash Inc. announced it’s buying Finnish food-delivery company Wolt Enterprises Oy in an all-stock deal valued at about 7 billion euros ($8.1 billion), marking its biggest purchase to date.
The shares rose as much as 12% in extended trading as DoorDash said combining forces with Wolt will speed product development, bring a greater focus to each company’s markets and improve the value to customers, merchants and couriers around the world.
“DoorDash and Wolt share a vision to build a global platform for local commerce that empowers the communities we operate in,” said Tony Xu, co-founder and chief executive officer of DoorDash. “Under the leadership of Miki Kuusi, Wolt has built a culture of optimism, operational rigor, and bias for action that matches our own.”
At the close of the acquisition, expected in the first half of next year, Kuusi will run DoorDash International, reporting to Xu. As a combined company, “we expect to increase our international scale, accelerate our product development, and improve our investment efficiency,” Xu said. “We expect to continue investing aggressively in the combined team to build our platform and grow our global business.”
News of the acquisition came as DoorDash posted a 45% increase in revenue to $1.28 billion for the third quarter, boosted by demand for meal delivery that has outlasted the depths of the pandemic. Wall Street had been banking on $1.16 billion on average, according to data compiled by Bloomberg.
San Francisco-based DoorDash has seen its shares rise 70% this year from a May low, leaving little room for error in its quarterly results. It’s also hard to beat last year’s growth metrics, during the height of the Covid-19 pandemic, when ordering food delivery was practically mandatory for anyone wanting a break from cooking three meals a day themselves. The stock was volatile in extended trading as the market digested the quarterly results and the acquisition. It was up 8.3% at 5:03 p.m. in New York.
During the lockdowns, DoorDash quickly established itself as the dominant platform, commanding 57% of all food delivery sales as of September, according to Bloomberg Second Measure.
Even as cities reopen and rising vaccination rates encourage people to return to in-person activities, customers’ craving for the convenience of ordering online hasn’t abated. Customers placed 347 million orders in the quarter, a 47% increase from a year earlier, with the gross value of those orders at $10.4 billion. Analysts were looking for $9.7 billion in gross order value.
The company projected gross order value of $10.3 billion to $10.7 billion in the fourth quarter, surpassing the $10.1 billion Wall Street expects.
People’s reliance on delivery has fueled demand beyond restaurants, spurring DoorDash to launch services across grocery, alcohol and pet supplies to capitalize on the shift in consumer behavior and hedge against a deceleration in pandemic-level growth. DoorDash and competitors including Just Eat Takeaway.com NV’s Grubhub and Instacart Inc. have all seen declines in average transaction values compared with last year, according to YipitData. DoorDash has bolstered partnerships with retailers like Bed Bath & Beyond Inc. and Ulta Beauty Inc. to provide same-day delivery for orders placed on their websites through its white-label product Drive. The company also rolled out sponsored listings in October in an effort to build out its advertising platform.
“Wolt has a massive runway ahead and our partnership is setting the foundation for our international growth,” Xu told Bloomberg in an interview. DoorDash equity issued as part of the transaction will be valued at $206.45 a share, according to a statement from the companies.
Launched in 2015, Helsinki-based Wolt operates in 23 countries, almost all of which will be new markets for DoorDash. The deal will expand DoorDash’s footprint to 700 million customers, Xu said.
DoorDash and its competitors have increasingly focused on boosting membership for their monthly subscription services which attract more repeat customers and higher basket sizes. There were 9 million customers using the subscription DashPass in the third quarter, almost half of the company’s total monthly users. Rival Uber Technologies Inc. said in an earnings call last week its own service Uber Pass counts 6 million members globally.
DoorDash reported adjusted earnings before interest, tax, depreciation and amortization of $86 million, above the $69.7 million analysts projected. Its net loss widened to $101 million from $43 million a year ago. Uber has been refining its delivery margins with its core food-delivery division Uber Eats reaching profitability on an adjusted Ebitda basis for the first time in the third quarter.
“It’s one thing for these companies to generate adjusted Ebitda in a pandemic when diners have few options,” said D.A. Davidson analyst Tom White. “Investors are keenly attuned to signs they’re making progress on profitability goals even after growth rates in online food delivery normalize.”
Meanwhile, the food-delivery giant’s tussles with local lawmakers are intensifying amid mounting regulatory scrutiny in some of its top markets. In August, New York City passed a measure that will make temporary caps on third-party delivery fees permanent, following a similar bill passed by San Francisco in June. DoorDash called the price controls “unconstitutional” and is challenging both cities in court.
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