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On Monday, UBS analyst Jo Barnet-Lamb downgraded Deliveroo Holdings PLC (LON:ROO:LN) (OTC: DROOF) from ’Buy’ to ’Neutral’, adjusting the price target to £1.80. The revision comes as DoorDash Inc. (NASDAQ:DASH) has confirmed the financial terms of its proposal to acquire Deliveroo (OTC:DROOF), stating the terms are final and will not be increased unless a competing offer emerges. According to InvestingPro data, Deliveroo’s stock has surged over 50% year-to-date and is currently trading near its 52-week high, with technical indicators suggesting overbought conditions.
Deliveroo’s board is endorsing the takeover offer from DoorDash, which has already secured irrevocable commitments from approximately 15.3% of Deliveroo’s stakeholders. This includes 6.46% from Deliveroo directors and around 8.97% from shareholders. The acquisition is structured as a scheme of arrangement, requiring the approval of at least 75% of the scheme’s shareholders to proceed. With a market capitalization of $3.36 billion and annual revenue of $2.59 billion, Deliveroo maintains a strong financial position, as evidenced by its healthy current ratio of 1.71 and overall GOOD financial health score according to InvestingPro analysis.
Amazon (NASDAQ:AMZN), holding a 14.4% stake in Deliveroo and noted as the company’s largest shareholder, has not provided an irrevocable undertaking to support the deal. Moreover, Amazon has not made any public statements regarding the acquisition. UBS highlighted that Amazon’s current strategy in the food delivery sector leans towards partnerships, as evidenced by incorporating Grubhub+ membership as a benefit for Amazon Prime members.
The UBS analysis also pointed out that Amazon’s capital allocation strategy seems to prioritize other areas. Among these are the expansion of AWS and AI in the cloud, the growth of one-day and same-day delivery services, the development of Prime Video content and advertising, and the deployment of near-earth orbit Kuiper satellites. These areas are viewed as more significant in terms of Amazon’s overall business strategy compared to a direct investment in food delivery services.
In other recent news, Deliveroo Holdings PLC has been the subject of significant developments due to a takeover offer from DoorDash Inc. DoorDash has proposed an all-cash acquisition of Deliveroo at 180 pence per share, valuing the company at approximately GBP 2.9 billion. This offer represents a notable premium over Deliveroo’s prior stock price and has been recommended by Deliveroo’s independent board committee. The potential acquisition is awaiting regulatory approvals but is expected to face limited scrutiny. In response to the takeover news, several financial firms have adjusted their ratings for Deliveroo. HSBC, Jefferies, Deutsche Bank (ETR:DBKGn), and Morgan Stanley (NYSE:MS) have all downgraded Deliveroo’s stock to a ’Hold’ rating, with a price target aligned with the offer price of GBP 1.80. Meanwhile, Kepler Cheuvreux initiated coverage with a ’Reduce’ rating, citing competitive challenges and potential risks if Deliveroo continues independently. Analysts have generally adjusted their expectations based on the acquisition terms, indicating limited growth potential for Deliveroo’s stock under the current circumstances.
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