Delivery Hero – the loss-making food delivery company – will go public with an initial public offering (IPO) that values it at more than $5 billion, as it seeks the funding to take it into new markets.
The German group said that it will offer nearly 40 million shares at a price of €25.50 each, amounting to €995.6 million. The 22.7% stake on offer means that the business is valued at over €4.42 billion – a sizeable premium on its competitors, which has been put down to Delivery Hero’s larger global footprint.
Traditionally it has been hot on acquisitions: in the last year alone, the firm has acquired Middle Eastern food delivery service carriage and Foodpanda, which operates 20 countries across Eastern Europe, Middle East and North Africa, and Asia.
And in December, it sold HungryHouse – its UK operation – to rival Just Eat for up to £240 million.
But Delivery Hero is loss making – to the tune of more than €200 million in 2016, a €40 million improvement on the previous year but a sizeable dent nonetheless. That’s in spite of the Berlin-based upstart processing almost 70 million more orders than in 2015. In four years, it has grown its revenue from €32.7 million to €297 million.
Consumers increasingly prefer mobile ordering, with the share of online food deliveries completed through apps expected to grow in the coming years.
Delivery Hero CEO Niklas Östberg said: “Delivery Hero has been on a strong growth path since its inception. Going public and listing our shares on the stock market will further enable us to develop the company and provide us with additional capital to expand our leadership positions in the online food ordering and delivery market. An IPO will also give us more flexibility as we continue to focus on creating an amazing takeaway experiences.”
Niklas Östberg has said that Delivery Hero is loss-making because it invests heavily in marketing, necessary to sustain high levels of revenue and order growth.
Östberg has previously said that Delivery Hero’s loss is a consequence of investing in less mature markets, as well as spending more on marketing and expanding Foodora – an alternative to services like Deliveroo that delivers meals direct from upmarket restaurants.
Analysts have pointed out that the business needs to spend money in order to sustain high levels of order growth and revenue growth, but the strategy – a cash-burner after all – won’t be sustainable forever.
Trading begins tomorrow.
© FoodBev Media Ltd 2024