We know consumers like easy delivery, but it's too easy not to be loyal to one company and the cost of customer acquisition is too high to for companies to battle it out in the marketplace. So the carving up of markets will accelerate in 2019.
— Jason Clampet
Takeaway.com NV agreed to acquire the German businesses of Delivery Hero SE for approximately 930 million euros ($1 billion), ending an expensive rivalry in a country where both were competing for market share at the cost of profitability.
Amsterdam-based Takeaway is paying approximately 508 million euros in cash and the rest in equity for Delivery Hero’s Pizza.de, Lieferheld and Foodora businesses in Europe’s biggest economy — the largest deal so far in food delivery in the region. Delivery Hero is also acquiring an 18 percent stake in its Dutch rival, it said in a statement Friday.
Takeaway and Delivery Hero were at loggerheads in Germany, with both companies investing heavily in customer acquisition. Takeaway CEO Jitse Groen had repeatedly said consolidation is inevitable in the industry, with large markets able to sustain just one player and predicting that only a handful of food-delivery services will survive.
The deal “allows Takeaway.com to operate on a significantly larger scale which is essential in building a profitable online food delivery business,” Groen said in an e-mailed statement.
By acquiring its closest competitor in Europe’s largest economy, Takeaway’s processed orders in Germany — a key industry metric — will double to 47 million on a stand-alone basis. Takeaway said it expects total cost synergies to exceed 60 million euros by 2020.
Delivery Hero updated its earnings forecast for the year, and said it sees its European operations breaking even in the second half of next year after it makes additional investments with the cash generated from the sale. The Berlin-based company will be focusing instead on other markets, including in Asia and the Middle East, Chief Executive Officer Niklas Oestberg said in a call with reporters.
Delivery Hero has been cleaning up its portfolio to focus on markets it’s dominating. In August, it announced it would discontinue activities in Australia, Italy, France and the Netherlands.
“Germany was a very contested market,” Oestberg said, adding that he’s not expecting Delivery Hero to sell more businesses for now.
©2018 Bloomberg L.P.
This article was written by Stefan Nicola and Wout Vergauwen from Bloomberg and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to [email protected].