Delivery Hero set to sell Deliveroo Stake

Berlin-based Delivery Hero has decided to sell its 4.5% stake in Deliveroo, valued at approximately £83 million, as the food delivery app sector grapples with ongoing challenges. Delivery Hero announced on Monday its intention to divest its entire holding of 68.2 million shares in the London-listed firm.

The move comes amid a challenging environment for food and grocery delivery apps, which witnessed a significant surge in value during the Covid-19 pandemic. Companies like Getir and Gorillas raised substantial amounts in investor funding, and Deliveroo itself raised £132 million from shareholders ahead of its initial public offering (IPO) in 2021.

However, the market dynamics have shifted since the end of the last lockdown, exacerbated by the current cost of living crisis. Executives in the sector, including Deliveroo, have been focused on cost-cutting and cash-raising initiatives over the past two years. Deliveroo, in particular, has undergone multiple rounds of layoffs as part of its efforts to navigate the challenges.

Despite challenges, Deliveroo has managed to reduce losses and increase revenue according to its most recent trading update. While the company is yet to report a profit, it upgraded its full-year earnings guidance earlier this month to "slightly above" the previous range of £60 million to £80 million.

The decision by Delivery Hero to sell its stake in Deliveroo is expected to provide new funds for "general corporate purposes" and reinforces the company's commitment to disciplined capital allocation. Following the announcement, both Deliveroo and Delivery Hero experienced a decline in their respective share prices, dropping around 5% and 11% on Tuesday morning. The move reflects the continued volatility and challenges facing the food delivery app sector in the current market landscape.