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Delivery Hero to use listing proceeds to stave off competition from Uber

By Reuters

  • 20 Jun 2017
Delivery Hero to use listing proceeds to stave off competition from Uber
Credit: Reuters

Online takeaway food delivery group Delivery Hero will use proceeds from a stock market listing for organic growth and acquisitions, its chief executive said, as it seeks to stave off rising competition from the likes of Uber.

The online takeaway business has been booming in recent years, prompting listings of firms like Britain's Just Eat and the Netherlands' Takeaway.com, as well as the more recent entry of Amazon and Uber.

However, online food delivery is seen as a "winner takes all" game as most users are only likely to download and use one app, meaning there is only enough space in most markets for one or two major players, underlining the need to build scale quickly.

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Delivery Hero announced on Monday that it aims to raise around 927 million euros ($1 billion) through a stock market listing that could value it at up to 4.4 billion euros, with about 450 million euros in new shares.

Of that, about 300 million euros will be used to pay back loans, and the rest to finance growth. CEO Niklas Ostberg told journalists the capital would be used to grow organically and through acquisitions.

"Growth and size is very important for building profitability," he said. "It is about time to have a European company in the tech space that is a global leader."

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News of the sale has boosted German e-commerce investor Rocket Internet, which holds a 35 percent stake in Delivery Hero. Its shares, which jumped on the news on Monday, were up another 2.5 percent at 0820 GMT on Tuesday.

Ostberg said Delivery Hero was market leader in 35 of the more than 40 countries it operates in Europe, the Middle East, North Africa, Latin America and Asia Pacific, and the total market it has access to is worth 72 billion euros.

Delivery Hero only competes with Uber in a few places, primarily major cities, Ostberg said, adding that the U.S. firm's entry into some markets had helped Delivery Hero by raising awareness of food delivery.

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"The focus on food rather than trying to do taxis and other stuff makes us unique," he said.

Christoph Stanger, an investment banker at Goldman Sachs who is advising Delivery Hero, said the books were already covered for the initial public offering (IPO) but said he was keen to build a "high quality book".

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