Shares in the food delivery company Deliveroo rose by 17% at the start of trading in London, following the announcement of a takeover approach from U.S.-based competitor DoorDash.
On Friday evening, it was disclosed that DoorDash had submitted an offer to acquire Deliveroo for approximately $3.6 billion (£2.7 billion).
Deliveroo confirmed it had received an indicative proposal from DoorDash for a potential all-cash offer valued at 180 pence per share. The company indicated that it would be “minded to recommend” the offer to its shareholders, subject to the finalisation of terms.
Following the news, Deliveroo’s share price climbed to 170 pence this morning.
In addition, Deliveroo announced today that it has suspended its £100 million share buyback programme in light of DoorDash’s approach.
DoorDash’s interest emerges four years after Deliveroo’s initial public offering on the London Stock Exchange, which was widely criticised and referred to as the City’s worst IPO. Deliveroo’s shares were initially priced at 390 pence but fell by 25% on their first day of trading, leading to the company being nicknamed “Flopperoo.”
DoorDash has until May 23 to submit a formal offer. If the deal goes through, it would expand DoorDash’s reach into 10 additional markets, strengthening its global footprint. The acquisition is unlikely to encounter regulatory obstacles, given the complementary nature of the two companies’ market positions.
Deliveroo co-founder and CEO Will Shu, who owns a 5.9% stake in the company, could earn more than £172 million if the takeover is completed. The company recently posted its first pre-tax profit of £12.2 million, marking a potential turnaround after years of financial struggles.
