Deliveroo: German rival buys stake in delivery platform

Online food delivery firm Delivery Hero has taken a 5% stake worth £284m in its UK rival Deliveroo.

Deliveroo shares jumped 11% to 360p on Monday following the news, its highest since the firm went public in March at 390p a share.

Delivery Hero's boss Niklas Oestberg said on Twitter that "in no scenario would this be a bad investment long term".

He added that he had known Deliveroo's co-founder Will Shu for many years.

"I'm holding a huge respect for what he and his team have built," said Mr Oestberg.

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The chief executive of the German company added that the stake in Deliveroo was acquired "at [a] decent gross profit margin". Delivery Hero, he said, considered Deliveroo's stock to be "undervalued", due to being "oversold at IPO".

Online food delivery platforms have seen a jump in popularity due to coronavirus lockdowns, but despite rising sales, neither Delivery Hero nor Deliveroo are yet to make a profit.

Delivery Hero is in about 50 countries worldwide, owning minority stakes in multiple businesses including popular European brand Just Eat Takeaway.com; Latin American app Rappi; the Middle East's largest platform Talabat in the UAE; Spanish food and on-demand courier service Glovo; and Southeast Asia's largest food delivery app Foodpandal.

The Berlin-based firm previously operated in the UK when it owned Hungryhouse, which was sold to Just Eat in in 2016.

In many countries the app-based company offers quick commerce, using its riders to deliver groceries, pharmaceutical products and electronics alongside restaurant food.

Shares in Delivery Hero dropped 1.3% on Germany's DAX index on Monday following the announcement of its stake in Deliveroo.

Delivery Hero informed its UK rival of its intended purchase after markets closed on 6 August.