Shares in the UK food delivery company Deliveroo have risen after reports that US rival Doordash held takeover talks with the business, with analysts suggesting other bidders could come forward in the coming weeks.
Doordash flagged an interest in a takeover of Deliveroo last month, but talks ended because the two sides could not agree on the value of the deal, Reuters reported.
The London-listed company’s share price jumped by 6% to 136p on Wednesday morning, and closed 1.2% up on the day, valuing the business at £2.1bn.
Its value had fallen more than 50% since debuting on the stock market in March 2021. The much-touted float of a pandemic success story turned out to be a disappointment, leading to some traders calling it “Flopperoo”.
Doordash’s New York-listed shares fell initially after the news broke on Tuesday, before recovering to close 1.25% higher.
Analysts at the financial services company Jefferies said: “In this instance, the talks have failed. But such is the strength of the financial, industrial and strategic logic of a Deliveroo takeover, we would not be surprised to see similar such headlines to re-emerge in the short term.
“In our view, the key to unlocking a recommended offer from Deliveroo is understanding the sensibilities of the founder CEO, Will Shu. This may only be the start.”
Delivery apps including Deliveroo thrived during the Covid-19 lockdowns when people were stuck at home and restaurants were closed, but since then demand for online food delivery has waned. Investors’ preference for more profitable businesses amid higher interest rates has weighed on Deliveroo shares. The company works with 180,000 restaurants and retailers and runs a network of 140,000 riders.
Amazon started investing in Deliveroo in 2019 and is its largest shareholder with a 13.2% stake, followed by the Cayman Islands-based venture capital firm DST Global with 7.5%, while Shu has a 6.5% holding. Amazon has previously been tipped as a potential buyer of Deliveroo.
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Deliveroo has come under fire for how it treats its riders, who are not employed directly and are paid for each delivery. Deliveroo and Doordash declined to comment on the takeover talks.
