Online food delivery company Delivery Hero has taken 5% stake worth £ 284m in its UK rival Deliveroo.
Shares of Deliveroo rose 11% to 360p on Monday following the news, the highest since the company first went public in March at 390p per share.
Long Run Investment
Delivery Hero’s Chief Niklas Oestberg highlighted on Twitter that “it is unlikely this will be a bad investment in the long run”.
He also said he had known Will Shu who was the founder of Deliveroo for many years.
“I have a great deal of respect for him and his team,” said Mr Oestberg.
The chief executive of the German company added that part of Deliveroo was acquired “with a very good GP margin”.
Delivery Hero’s Operations
Delivery Hero feels that Deliveroo’s stock is “undervalued”, because it was “oversold on the IPO”.
Online food delivery platforms have seen an increase in popularity due to coronavirus restrictions last year. But apart from increased sales, Delivery Hero or Deliveroo has not made a profit.
Delivery Hero is located in about 50 countries around the world, with a handful of minority stakes in many businesses including the famous European brand Just Eat Takeaway.com; Latin American Rappi app; the largest Middle East platform in Talabat in the UAE; Spanish food and sought-after courier service Glovo; and Foodpandal’s: the largest food delivery service in Southeast Asia.
The Acquisition
The Berlin-based company previously operated in the UK while running Hungryhouse, which was sold to Just Eat in 2016.
In many countries the app-based company provides instant deliveries with the help of its drivers who deliver groceries, pharmaceutical and electronic products alongside regular restaurant food.
Shares in Delivery Hero fell 1.3% on the German DAX index on Monday following the announcement of its stake purchase in Deliveroo.
Delivery Hero has informed its UK rival of its intended purchase after the market closed on August 6th.
