- 180p offer 30% premium to undisturbed price
- Deliveroo listed in London at 390p per share in 2021
- Rival Just Eat Takeaway also in process of being take over
Food delivery business Deliveroo’s (ROO) shares surged 24% in early London trading Monday (28 April) after the company said it has suspended its £100 million share buyback programme, just days after revealing it had received a takeover proposal from US-based DoorDash (DASH:NASDAQ).
The company revealed after the market close on Friday (25 April) that it had been approached on 5 April with a £2.7 billion bid, equivalent to 180p share.
Deliveroo said it would likely recommend the offer to shareholders, pending agreement on final terms.
According to a source cited by Reuters, the proposed deal is not expected to trigger regulatory concerns, as it would give DoorDash entry into 10 new markets where it currently has no presence. So why the share price is still trading below the offer price at 171.5p seems a little odd.
Perhaps is simply the margin for error in case DoorDash walks away.
RIVAL BID?
‘There was speculation among analysts that Deliveroo could receive a rival bid, yet the share price performance doesn’t suggest that is on the cards’, said AJ Bell’s investment director Russ Mould. ‘The share price would trade much higher than the 180p level if the market seriously thought a counterbid would happen.’
What’s interesting is how the shoe is now on the other foot regarding the leading players. Both Deliveroo and Just Eat Takeaway (TKWY:AMS) were seen to be among the elite of the food delivery sector, leading the charge with industry consolidation. Now they’re the ones being eyed up as takeover targets, with Prosus in the process of buying Just Eat.
Deliveroo’s IPO went down in history as one of the worst starts to life as a public company. The ‘Flopperoo’ event saw Deliveroo’s share sink on the first day of trading in 2021 and despite a brief recovery, the shares have struggled for the majority of its time on the market.
‘Existing shareholders might push for a better price from DoorDash, but the fact Deliveroo’s board were so quick to talk favourably about the approach implies the group doesn’t have fantastic prospects as a standalone entity. Being part of a bigger company might be its best bet in a market that’s lost its shine since the Covid boom’ says Mould.
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Steven Frazer) and the editor (James Crux) own shares in AJ Bell.
