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Location: Home / Article / Delivery Hero takes a 5.09% stake, worth around £400M, in rival Deliveroo, sending shares of Deliveroo up over 10% from £3.36 to £3.60 per share

Delivery Hero takes a 5.09% stake, worth around £400M, in rival Deliveroo, sending shares of Deliveroo up over 10% from £3.36 to £3.60 per share

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A Deliveroo courier rides along Regent Street delivering takeaway food in central London during Covid-19 Tier 4 restrictions.

Pietro Recchia | SOPA Images | LightRocket via Getty Images

LONDON – Shares of food delivery firm

Deliveroo

climbed over 10% Monday after the company announced larger German rival

Delivery Hero

has taken a 5.09% stake in the business.

The firm's stock climbed from £3.36 ($4.66) per share to £3.60 per share in early deals on the London Stock Exchange Monday, reaching their highest point since trading began in March. Meanwhile, shares of Delivery Hero remained relatively flat on the Frankfurt Stock Exchange.

Deliveroo's market value is around £8 billion so Delivery Hero's investment appears to be worth roughly £400 million. Deliveroo declined to comment on the exact size of the investment, while Delivery Hero did not immediately respond to a CNBC request for comment.

In a note to investors, Deliveroo said it received a notification "of major holdings in the company's shares from Delivery Hero after market close on 6 August 2021."

Founded in 2013 by Will Shu and Greg Orlowski, Deliveroo got a boost from Amazon in 2019 when the e-commerce giant

led a $575 million funding round

into the company.

It made a loss of £223.7 million on revenues of £4.1 billion in 2020, which is substantially less than the £317 million it lost on £2.5 billion of revenue in 2019.

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Deliveroo went public in March and while trading got off to a bumpy start, the company's share price has recovered somewhat since then.

Delivery Hero's investment comes amid a period of consolidation in the food delivery market.

London-headquartered Deliveroo and Berlin-based Delivery Hero are two of the largest food delivery companies in Europe and they've been fighting for market share in countries across the continent and beyond for almost a decade.

Delivery Hero, which is considerably larger than Deliveroo with a market cap of around 30 billion euros ($35 billion), also holds minority stakes in food delivery companies including Glovo, Just Eat Takeaway, Rappi and Zomato.

Niklas Östberg, Delivery Hero's co-founder and CEO, said on Twitter that Deliveroo "felt undervalued," adding that he has "huge respect" for Shu and his team. Delivery Hero has been acquiring shares since April and it has paid an average of £2.70 per share, Östberg said.

It competes with Deliveroo in the Middle East through its Talabat business, and in Hong Kong and Singapore via its Foodpanda division.

Deliveroo and Delivery Hero don't, however, compete in the U.K., which is Deliveroo's main market. That's because Delivery Hero sold its U.K. business, Hungryhouse, to Just Eat in 2016 for around £200 million.

Like UberEats and DoorDash, Deliveroo and Delivery Hero rely on an army of self-employed couriers to deliver food from restaurant kitchens to people's homes and offices in cities around the world in around 30 minutes, taking a cut on each order in the process.

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