DoorDash Closes Biggest Deal Yet As Competition In Food Delivery Intensifies

The all-stock deal is DoorDash’s biggest buy to date, eclipsing the Caviar acquisition in 2019. It is the latest merger in the rapidly consolidating food delivery market, which has greatly benefited pandemic, but where the benefits are elusive. Last year, Just Eat NV bought Grubhub for $ 7.3 billion while Uber Technologies Inc. bought Postmates Inc. for $ 2.65 billion.

Despite its meteoric rise in the United States, DoorDash has been slow to expand internationally. The company’s first foray outside North America was in Australia in 2019 and most recently in Japan in June. San Francisco-based DoorDash is looking for a way into the competitive European market dominated by players like Just Eat Takeaway, Deliveroo Plc and Germany’s Delivery Hero SE.

“This partnership is really about accelerating and expanding to win a bigger prize on an even bigger global stage,” Tony Xu, DoorDash co-founder and CEO, said in a conference call with analysts on Tuesday. .

While DoorDash’s growth in the United States has been largely organic, the company has taken a different approach to penetrate the crowded continental market. He is leading a fundraiser at German grocery delivery start-up Flink SE after talks with Gorillas Technologies GmbH failed in August.

“DoorDash was late in the game’s international expansion,” said Tom White, analyst at DA Davidson. “Again, they came into the business a bit late in the US as well and their playbook was a hit, so never say never. “

Shares of DoorDash climbed 24% in extended trading in New York after the deal was announced and third-quarter results that beat analysts’ estimates.

Founded in 2014, Helsinki-based Wolt operates in 23 markets across Europe, 22 of which will be new to DoorDash and expand its presence to 700 million customers, Xu said. Wolt focused on mid-level markets, stretching from Helsinki to places like Stockholm and Tel Aviv. In 2020, the company entered Berlin and Tokyo. However, even with Wolt’s reach, DoorDash will still be absent from the UK, where Uber launched in 2016.

“Wolt has a huge trail to go and our partnership lays the foundation for our international growth,” Xu said in an interview.

Wolt, which has 4,000 employees, raised more than $ 800 million from investors, including $ 530 million in January led by Iconiq Growth. PitchBook valued Wolt at $ 3.61 billion after the funding round. The company was preparing for a possible IPO next year. Upon closing of the acquisition, expected in the first half of 2022, Miki Kuusi, co-founder and CEO of Wolt, will lead DoorDash International, under the leadership of Xu.

Like DoorDash, Wolt has expanded its services beyond restaurant take-out to deliver groceries and retail products like pharmaceuticals. DoorDash launched grocery, alcohol and pet supply services to capitalize on changing consumer behavior and guard against a growth deceleration to the pandemic level. It has strengthened its partnerships with retailers like Bed Bath & Beyond Inc. and Ulta Beauty Inc. to ensure same-day delivery of orders placed on their websites through its white-label product Drive.

“DoorDash and Wolt share the vision of creating a global platform for local commerce that strengthens the communities in which we operate,” said Xu.

During pandemic lockdowns, DoorDash quickly established itself as the dominant platform, commanding 57% of all food delivery sales in the United States in September, according to Bloomberg Second Measure. Even as cities reopen and rising vaccination rates encourage people to resume their activities in person, shoppers’ urge to order online has not abated. DoorDash customers placed 347 million orders in the third quarter, an increase of 47% from the previous year, with the gross value of those orders reaching $ 10.4 billion.

Wolt, which has more than 2.5 million active users, has a gross order volume of more than $ 2.5 billion on an annualized basis, according to an investor presentation.

While the demand is clear, DoorDash and Uber are both looking for profit. In third-quarter results released Tuesday, DoorDash showed its net loss widened to $ 101 million from a loss of $ 43 million a year earlier.

Uber announced its first-ever adjusted third-quarter profit, helped by Uber Eats, which exploded during the pandemic and helped offset an increase in demand for ridesharing. The company said last week that the delivery segment, which includes restaurant, grocery and liquor orders, continued to grow despite the resumption of indoor dining, up 50% from to a year ago to reach $ 12.8 billion in bookings.

DoorDash said the Wolt deal is expected to help drive gross order volume growth next year. It expects combined adjusted pro forma earnings before interest, taxes, depreciation and amortization to be between $ 0 million and $ 500 million in 2022, the company said in a statement.

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