Deliveroo Shares Jump After Delivery Hero Buys Stake
(Bloomberg) -- Deliveroo Plc shares jumped the most since its initial public offering after Delivery Hero SE bought a 5.1% stake, a vote of confidence in the troubled U.K. food-delivery company’s stock.
Delivery Hero bought the shares at an average price of about 270 pence apiece when it started acquiring them in April, Chief Executive Officer Niklas Oestberg said in a series of tweets on Monday. The company was “oversold” at the IPO, has a “decent profit margin” and “felt undervalued to us,” he said.
At that price, Delivery Hero may have spent about 235 million pounds ($319 million) on the stake, according to Bloomberg calculations. The company isn’t buying any Deliveroo shares “at this point,” Oestberg said.
Read More: Deliveroo Shares Hit Post-IPO High After Delivery Hero Stake
The deal makes Delivery Hero a top-10 shareholder in Deliveroo. The Berlin-based company owns stock in a number of companies in the industry, including Just Eat Takeaway.com NV, Spain’s Glovo and India’s Zomato Ltd., according to data compiled by Bloomberg.
Deliveroo shares rose 5.9% to 344.30 pence at 2:10 p.m. in London after earlier gaining as much as 11%, the biggest gain since the company’s IPO in March. The stock, which tumbled in the days after its listing, is still down 12% from the IPO price. Delivery Hero fell 2.4% in Frankfurt.
A spokeswoman for Deliveroo declined to comment.
Food-delivery businesses have surged since the Covid-19 pandemic forced shoppers and restaurant goers to stay home and encouraged people to order food online. Many have branched out beyond delivering pizza and burgers to add groceries and convenience items as well as “dark” stores, with hubs near population centers to help make deliveries faster.
“The profile of an operator positioned to do well is one with delivery in its DNA, an aggressive and progressive attitude to leveraging delivery, and a first-mover advantage in grocery, preferably on the dark store model,” Jefferies Financial Group Inc. analyst Giles Thorne said in a note on Monday. “This is the backbone of our stock preferences for both Delivery Hero and Deliveroo (alongside attractive valuations). It would appear that Delivery Hero agrees.”
Both companies are due to report financial results this week.
Delivery Hero’s strategy of buying stakes in other companies in the delivery business has caused conflict in the past. During Takeaway’s negotiations for Just Eat in 2019, Delivery Hero caused controversy by selling about 3 million of its Takeaway shares, hurting the stock price and lowering the value of its bid.
Prosus NV, Delivery Hero’s biggest shareholder, also owns stakes in several companies in the burgeoning industry, including Brazil’s iFood and Berlin-based Flink. While its online food business is yet to turn profitable, Prosus values it at about $16 billion.
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