Shore Capital said Delivery Hero was seen as a potential acquirer of Deliveroo

Delivery Hero is selling its stake in rival food delivery group Deliveroo for more than £70m.

The German listed firm revealed plans to sell off its 68 million shares in Deliveroo – amounting to a 4.5% stake in the London-headquartered company – in a placing with institutional investors at a price of 113p each, potentially raising £76.8m if it goes ahead.

Delivery Hero said it did not intend to hold any remaining shares in Deliveroo and added the placement underlined its “commitment to disciplined capital allocation”.

Shares in Delivery Hero sank by 5.3% to €21.42 in trading today, while in London, Deliveroo shares are down 3.2% to 118p.

Food delivery firms have faced increased pressure to move to profitability, as the explosion in demand during the pandemic tailed off and the cost of living crisis slowed consumer spending in the sector.

Shore Capital analyst Bradley Hughes highlighted the move comes two months before Deliveroo founder Will Shu’s ‘golden shares’ expire, which currently give him extra voting powers, including the ability to block a hostile takeover.

Hughes added a bid premium had been built into Deliveroo’s valuation and helped its share price recover in the past year.

“A large part of the European food delivery market debate has been around consolidation,” he said in a note today.

“Investors may infer that the choice to dispose of Deliveroo shares indicates the strategic review of Southeast Asian assets for Delivery Hero is continuing to be sluggish.

“Delivery Hero was one of the more plausible potential acquirers of Deliveroo, despite their balance sheet headaches, so them selling down takes a key horse out of the race and is a slight blow to the bull case, we think. That said, Doordash may use the opportunity to move in, in which case the M&A premium would likely stay a part of the debate.”

Delivery Hero, which is also attempting to sell its Foodpanda business in Asia, has built its stake in Deliveroo since 2021.

The accelerated bookbuild process is being run on behalf of Delivery Hero by Barclays Bank Ireland, Goldman Sachs Bank Europe and Morgan Stanley Europe. The placement is expected to settle on 1 February 2024.

Shares in Deliveroo recovered significantly in 2023, rising about 30%, but the stock still remains well down on the 390p IPO price.