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On Thursday, HSBC analyst Christopher Johnen downgraded Deliveroo Holdings PLC (LON:ROO:LN) (OTC: DROOF) stock from ’Buy’ to ’Hold’, adjusting the price target to GBP 1.80 from the previous GBP 1.70. According to InvestingPro data, the stock is trading near its 52-week high with a strong YTD return of 49%. The revision follows news that DoorDash Inc. (NASDAQ:DASH) has proposed to acquire all shares of Deliveroo (OTC:DROOF) for 180 pence per share in an all-cash transaction, valuing the company at approximately GBP 2.9 billion on a fully diluted basis.
The acquisition offer by DoorDash stands at a roughly 44% premium over Deliveroo’s closing stock price of 125 pence on April 25, the day before DoorDash’s open offer letter was made public. The proposed deal’s enterprise value to adjusted EBITDA multiple is 13.4x, based on Deliveroo’s mid-point adjusted EBITDA guidance for 2025. Deliveroo currently generates annual revenue of $2.59 billion and maintains a healthy financial position with a current ratio of 1.71, as revealed by InvestingPro analysis. This valuation is compared to the recent EUR 4.1 billion bid by Prosus (OTC:PROSF) (PRX) for Just Eat Takeaway.com (TKWY), which implied a multiple of 12.5x.
Deliveroo’s independent board committee has assessed the terms of DoorDash’s acquisition offer and considers them to be fair and reasonable. The potential acquisition is subject to regulatory approval, including antitrust reviews in the EU and UK, Italian foreign direct investment clearance, and EU financial services regulation approval. However, given that DoorDash and Deliveroo do not have overlapping delivery operations, it is anticipated that the deal will face limited regulatory scrutiny.
DoorDash’s offer is declared final and will not be increased unless a competing offer emerges. The acquisition, if successful, would mark a significant consolidation in the food delivery industry, as companies strive to strengthen their market positions amid increasing competition and evolving consumer preferences. InvestingPro subscribers can access 13 additional key insights about Deliveroo, including detailed financial health metrics and valuation analysis in the comprehensive Pro Research Report.
In other recent news, Deliveroo Holdings PLC has been the focus of significant developments concerning a takeover offer by DoorDash. The acquisition proposal, valued at 180 pence per share, has prompted various analyst firms to adjust their ratings and price targets for Deliveroo. Jefferies downgraded the stock from Buy to Hold, aligning its price target with the offer at £1.80, citing the high probability of a successful acquisition. Similarly, Deutsche Bank (ETR:DBKGn) also downgraded Deliveroo to Hold, raising its price target slightly to GBP1.80, reflecting the limited upside potential under the current acquisition terms.
Kepler Cheuvreux took a more cautious stance, initiating coverage with a Reduce rating and a price target of £1.56, highlighting potential challenges and increasing competition in the food delivery sector. Meanwhile, Morgan Stanley (NYSE:MS) adjusted its rating from Overweight to Equalweight, setting a price target at GBP1.80, influenced by the premium offered by DoorDash over recent stock prices. The offer has been recommended by Deliveroo’s Independent (LON:IOG) Committee, and key shareholders have shown support for the acquisition. These developments have led to a consensus among analysts that Deliveroo’s stock is likely to trade close to the offer price, with limited growth prospects in the near term. Investors are now closely monitoring the situation as Deliveroo evaluates the proposal and considers its next steps.
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