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Uber has agreed to purchase rival Delivery Hero’s business in Taiwan, in a $1.25bn deal that will also see the Silicon Valley company take a minority stake in the food delivery group, sending the German outfit’s shares up by 20 per cent.
The two companies said on Tuesday that Uber, which operates Uber Eats, would purchase Delivery Hero’s foodpanda brand in Taiwan for $950mn in cash, and would also acquire a 3 per cent stake in Delivery Hero for $300mn.
Under the terms of the deal, Uber will buy 8.4mn newly issued ordinary shares priced at €33, a more than 30 per cent premium to Delivery Hero’s closing share price on Monday. Delivery Hero’s shares rose by almost 20 per cent in morning trading on Tuesday, to €30.20.
Food delivery groups have burnt through billions to grow their customer bases in a fiercely competitive landscape over the past decade, and investors have started clamouring for signs that the sector can be sustainably profitable.
On Tuesday, Delivery Hero chief executive and co-founder Niklas Östberg said the lossmaking company had concluded that “we need to focus our resources on other parts of our global footprint, where we feel we can have the largest impact for customers, vendors and riders.”
The Berlin-based group said on Tuesday that it planned to use the proceeds from the share sale to buy back convertible bonds “to enhance its capital structure”.
Meanwhile, Uber notched up its first full year of operating profitability in 2023, which the company hailed as an “inflection point” in its tumultuous history. In quarterly earnings last week, Uber’s chief financial officer Prashanth Mahendra-Rajah said that the company had a “high bar” for any dealmaking opportunities as it doubled down on financial “discipline” in the drive to improve profitability.
Uber is seeking to grow its food and grocery delivery business in countries around the world — including in Taiwan, where Uber Eats already operates — and is vying with rivals, including DoorDash in the US, to grow market share and bolster margins.
The deal announced on Tuesday was expected to broaden Uber’s reach in Taiwan beyond major urban centres into the smaller cities and southern regions that foodpanda had a presence in, the companies said.
It follows a partnership announced by Uber and US grocery delivery group Instacart last week that the tech giant hopes will help it compete better with DoorDash in the American suburbs. Under that deal, Instacart’s users will be able to order from restaurants listed on Uber Eats.
Pierre-Dimitri Gore-Coty, senior vice-president of delivery at Uber, said the foodpanda deal would “allow us to deliver more choices and the best prices for consumers, stronger demand for restaurants, and more earnings opportunities for delivery partners”.
The majority of Uber’s total revenue — including from its ride-hailing segment — is generated in the US and Canada, with about 12 per cent coming from the Asia-Pacific region in 2023. The deal is subject to regulatory approval and expected to close in 2025.
