Delivery Hero Soars on Deal to Sell Taiwan Business to Uber

The deal is fairly priced and represents a vote of confidence from a leading global player, Morningstar's analyst says

Antje Schiffler 14 May, 2024 | 11:25AM
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A delivery driver accepting an order

Delivery Hero (DHER) shares soared nearly 20% Tuesday morning on news that the company is selling Foodpanda in Taiwan to Uber Technologies (UBER) for $950 million. Separately, the companies have entered into an agreement for Uber to purchase $300 million in newly issued ordinary shares of Delivery Hero, which is listed in Germany.

The deal took markets by surprise as negotiations between the two companies were terminated in February after the parties could not agree on terms.

Shares in Just Eat Takeaway.com (JET) and Deliveroo (ROO) also rose after the news of the deal broke. Just Eat rose almost 6% in London whilst Deliveroo gained nearly 3%.

“We view the proposed deal as a positive for narrow moat Delivery Hero, as the company can use the cash to strengthen its balance sheet,” says Morningstar’s senior equity analyst Ioannis Pontikis.

“We also think the price paid at 0.6 times EV/GMV is fair (compared to DHER's EV/GMV of 0.3). Uber has also agreed to purchases $300 million in newly issued stock at a 30% premium from Delivery Hero, a vote of confidence to DHER's outlook by one of the largest players globally,” he adds.

The deal needs to go through antitrust approval and is targeted to close in the first half of 2025. If the deal receives the green light, it will create a virtual monopoly with Uber Eats controlling around 80% of Taiwan's market.

Key Morningstar Metrics for Delivery Hero Stock

• Fair Value Estimate: 34.00 EUR
• Current Price: 30.60 EUR
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: Very High

The German online food delivery company reported strong first quarter revenues and upgraded its growth guidance on April 25.

“DHER reported a stronger-than-expected start to the year, with a beat on GMV and segment revenue, and raised its segment revenue guidance while confirming the adjusted EBITDA guidance range for FY24,” according to Silvia Cuneo and Nizla Naizer, research analysts at Deutsche Bank Research.

The MDax-listed stock has gained 17% year-to.date (as of May 13) and outperformed the STOXX 600 (up 8.87%).

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Delivery Hero SE30.50 EUR-1.13Rating

About Author

Antje Schiffler  is an editor for Morningstar in Frankfurt.

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