U.S. meal delivery firm DoorDash will buy Deliveroo in a deal valuing the British rival at about 2.9 billion pounds ($3.85 billion), the companies said, banking on their combined reach and local expertise to take on competition, according to Reuters.
Separately on Tuesday, DoorDash said it would buy SevenRooms, a New York City-based hospitality-related software company, for about $1.2 billion.
Analysts have said the food delivery sector is ripe for further consolidation as inflation and squeezed incomes has made consumers more cautious about spending on deliveries and similar businesses have found it difficult to add scale.
The companies revived talks last month after DoorDash approached Deliveroo with a 180 pence per share proposal. It was confirmed on Tuesday as the final offer, sending Deliveroo shares up about 2%.
Even at Tuesday's high of 176.40 pence, the stock traded under the offer price. Deliveroo's shares have struggled since their debut when they were sold at 390 pence in 2021, when meal-delivery services were boosted by the pandemic.
Deliveroo's founder and CEO Will Shu, who delivered takeaways on a scooter in the group's early months, said comparing the IPO price with the deal was not necessarily fair.
"That was a different time, (and) a different interest rate environment," he told Reuters, adding that the stock had traded above the IPO price at one point and barely above 70 pence.
Deliveroo had a bright future, he said, but it had larger global competitors.
"The board and myself evaluated that and said: 'Where do we think Deliveroo should be in order for us to truly win?'" he said. "And we thought this was the right place for us."
Russ Mould, investment director at AJ Bell, said too many food delivery companies were chasing the same opportunity and that was unsustainable.
"Only the strongest will survive and they're the ones picking up smaller rivals who realise their future is best part of a bigger entity, and not going it alone," he said.
The acquisition will help DoorDash grow its market share in Europe, competing against Just Eat and Uber Eats, as it adds Deliveroo's largest market, Britain and Ireland to its roster, along with others.
DoorDash's Nasdaq-listed shares fell about 7% after the company also gave a broad forecast for second-quarter profit.
It expects adjusted earnings before interest, tax, depreciation and amortisation to be between $600 million and $650 million, compared with the average analyst estimate of $627 million, according to data compiled by LSEG.
DoorDash said demand remained strong, but that it was "conscious of the potential for changes in consumer demand".
Uber, whose food delivery unit has recorded strong growth, said on Tuesday it would acquire an 85% stake in Turkish e-commerce firm Trendyol's online food delivery business for about $700 million.
