Uber in talks to take over Deliveroo, hitting Just Eat
Uber is in early-stage talk to buy Deliveroo to boost its food delivery services, news that sent Just Eat shares sagging to a one-year low.
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The US ride sharing group, which has its own Uber Eat delivery arm, was looking at buying Deliveroo for "several billion" dollars, Bloomberg reported, with any bid needing to be significantly above the $2bn Deliveroo valuation from last year when Deliveroo raised $98m from private investors.
Uber had $6bn in cash as of the end of last December but has raised more cash since.
Analysts at Peel Hunt said that while a Deliveroo takeover was far from a done deal, it "would be a shift in the paradigm of the cooked food delivery market in the UK and beyond and could put enormous pressure on the poster child for takeaway aggregation, Just Eat".
Still, it argued that Just Eat's buying power to get discounts for its restaurants, its invaluable big data assets, and the large swathe of customers that use and continue to use the platform is still a huge barrier to entry for the smaller players.
Just Eat shares, which topped 900p earlier this year, were down 5% on Friday to 672.4p, earlier falling below 650p for the first time in over a year.
Broker Canaccord called it a "potentially terrifying development" for Just Eat, though it had already removed the company from its 'buy' list in March as it grew concerned about the intensification of competition between Just Eat and Deliveroo.
"In spring Just Eat announced plans to push into the Quick Service Restaurant market with a new delivery capability. The move mirrors Deliveroo's plans to push into Marketplace where restaurants with their delivery set-up will also be able to plug into Deliveroo's network of 15,000 riders to cope with peak demand. Meanwhile it is explicit that it will protect market share ahead of profits in Marketplace as it pushes into the Quick Service Restaurant. A possible war for market share could be very damaging for margins and profits."