Deliveroo suspends buyback after £2.7m DoorDash proposal

(Sharecast News) - Deliveroo said on Monday that it was suspending the £100m share buyback programme announced last month after receiving a 180p per share takeover proposal from US rival DoorDash. In a brief statement, the company said that any recommencement of the buyback programme will be announced to the market.

Deliveroo announced late on Friday that it had received an indicative £2.7m takeover proposal from DoorDash on 5 April. It said it was minded to recommend the proposal should a firm offer be made.

At 0810 BST, Deliveroo shares were up 16% at 169.90p as investors got a chance to react to the takeover news.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "Speculation about a potential deal first erupted last year, and although no formal offer has been made, talks are continuing. Deliveroo has said it would be minded to recommend the offer if it comes through for £1.80 a share. If the deal is done at that price, the company will fail to shake off the 'Floperoo' tag it was saddled with after its disastrous IPO debut in 2021.

"Even though Deliveroo has finally broken through into profitable territory, the prolonged bout of indigestion around its share price has continued. The surge in demand for home deliveries during the pandemic waned just as competition heated up. Deliveroo's foray into grocery deliveries has helped it turn a profit but it's still facing fierce rivals.

"Just Eat which has the biggest share of the market is being gobbled up by the global technology firm Prosus, while Uber Eats is angling for a bigger slice of business. The delivery market is in a era of consolidation with tech giants vying for opportunities right across the consumer focused space with potential to offer groceries, restaurant made meals and financial services in simple clicks.

"The Doordash Deliveroo deal will be unappetising for the government which has been trying to boost the number of tech companies listed in London. If Deliveroo is purchased it would join a stream of companies leaving the London Stock Exchange, with too few IPOs in the pipeline to make up the numbers. Even despite the recent volatility hitting Wall Street London, firms have not been immune and UK-listed companies are still undervalued compared to US peers."