Deliveroo shares soar on takeover bid, but analysts say DoorDash offer falls short

Shares in Deliveroo surged on Monday morning after the London-listed food delivery group announced it had received a $3.6 billion (£2.7 billion) takeover approach from US rival DoorDash.

The stock jumped 17% at the start of trading, making it the top performer on the FTSE 250 index, which was up 0.7% overall.

Deliveroo said it had received an indicative proposal from DoorDash offering 180p per share in cash.

The company’s board indicated that it would be “minded to recommend” such an offer to its shareholders should a formal bid be made.

Deliveroo shares rose to 170p early on Monday, up sharply from their closing price of 146.6p on Friday.

In a separate announcement, Deliveroo said it would suspend its £100 million share buyback programme with immediate effect, citing the approach from DoorDash.

The company had been returning cash to shareholders following efforts to stabilise its business after a rocky public debut.

DoorDash a "natural buyer" but offer leaves room for rival bids: analysts

Analysts have described DoorDash as a logical acquirer for Deliveroo, noting that the two companies have limited geographic overlap.

"DoorDash is a natural buyer for Deliveroo given that there are no real geographic overlaps between the two companies, Morgan Stanley analyst Luke Holbrook wrote.

However, some market commentators suggested that the 180p per share offer might not be enough to seal the deal without competition.

Brokerage Panmure Liberum said the offer was “by no means a knockout valuation”, leaving room for a potential bidding war.

Prior to the latest developments, the firm had a target price of 200p on Deliveroo shares.

Deliveroo, co-founded by chief executive Will Shu in 2013, operates across nine countries and works with around 135,000 riders.

Should the takeover proceed at the proposed price, Shu stands to collect more than £172 million based on his 5.9% holding in the business.

Deliveroo's journey from a rocky IPO to takeover target

Deliveroo’s journey on the London Stock Exchange has been tumultuous.

The company floated in 2021 at an initial price of 390p per share but saw its stock tumble by 25% on its first day of trading, earning it the nickname “Flopperoo”.

Deliveroo has struggled for years to break even as it expanded aggressively from a startup to a major player in the global food delivery industry.

In 2024, however, the company not only posted its first profit but also generated positive cash flow for the first time.

Revenue rose to £2.1 billion, driven by a 5% increase in the total value of orders to £7.4 billion.

DoorDash had previously held talks with Deliveroo over a possible takeover, but negotiations reportedly collapsed over valuation disagreements.

Its renewed interest comes amid pressure on food delivery companies from inflation and changing consumer habits.

The move fits into DoorDash’s broader international expansion strategy.

The US-based group operates marketplaces in over 30 countries and has made several high-profile acquisitions, including buying Finnish firm Wolt in 2022 for more than $8 billion and acquiring premium service Caviar in 2019.

A combination with Deliveroo would further consolidate the competitive food delivery sector, which continues to grapple with thin margins, rising costs, and growing demands for profitability.