Loss-making food delivery firms to show there is appetite for deal-making this year

Last year saw frenzied activity in the food delivery sector, during which pandemic lockdowns caused sales to surge.

Amsterdam-based Just Eat Takeaway perhaps faces the most pressure of the major delivery companies.

With a midnight deadline looming on New Year’s Eve, Germany’s Delivery Hero clinched an 11th-hour deal for a majority stake in Spanish peer Glovo. Two weeks later, it said it would sell down its holding of Latin-American company Rappi. Then this week, it told investors its food-delivery business would break even within months.

The first announcement capped off another year of frenzied activity in the food delivery sector, during which pandemic lockdowns caused sales to surge and investors to rush into established companies and rapid grocery startups alike.

But with markets cooling amid interest-rate rises, Delivery Hero’s latter announcements are more illustrative of a shift in focus expected across the industry.

The market’s appetite to fund European loss-making technology companies is diminishing,” said Jefferies analyst Giles Thorne.

Shares in Delivery Hero jumped over 9% after the company said its food delivery unit would break even in the second half.

Amsterdam-based Just Eat Takeaway perhaps faces the most pressure of the major delivery companies, however, with its shares down more than 40% since the start of last year.

Just Eat’s management has indicated to some investors that they’re open to the idea of a sale of Grubhub, a source said. Yesterday, Just Eat shares rose as much as 7.6% in trading in Amsterdam. It’s not just Grubhub, either: Just Eat is also working to sell its 33% stake in Brazilian delivery company iFood.

It said in August it rejected a €2.3bn bid, but former Just Eat executive David Buttress, who led the deal for iFood, said the stake could be worth twice that, and expects a deal in the first half of this year so the company “can keep the wolf from the door”.

Just Eat also faces a battle in Germany, a key market, with new entrants Uber and DoorDash looking to cut into its market share.

Meanwhile, the spate of startups — including Gorillas Technologies — that sprang up around the pandemic offering delivery of groceries and convenience goods within 15 minutes are also poised for a new phase.

Deliveroo, which has seen its stock sink nearly 50% since going public last March, has also held talks with rapid grocery startups about potential acquisitions such as the UK’s Dija, according to sources.

American market leaders will likely keep their eyes on Europe after San Francisco-based DoorDash agreed to acquire Finland’s Wolt Enterprises in a €7bn deal in November.

Bloomberg