MW Amazon faces dilemma after DoorDash deal to buy Deliveroo for $3.9 billion

By Jules Rimmer

Tech giant Amazon.com bailed out U.K.-based food-delivery service Deliveroo during the pandemic, taking a 16% stake for $575 million. Five years - and no profits later - Amazon has a decision to make: it must decide whether it wishes to crystallize a loss and sell up or make a counterbid to the GBP2.9 billion ($3.9 billion) offer from DoorDash for the food delivery company.

The GBP1.80 per share bid for Deliveroo (UK:ROO) proposed by DoorDash $(DASH)$ on April 5 has been agreed by the two boards but, as of Tuesday morning, DoorDash only had 15% irrevocable commitments (confirmed acceptances from existing Deliveroo shareholders) and Amazon is notable by its absence. If Amazon $(AMZN)$ were on board, this would basically be a done deal. Deliveroo shares are trading a few percent below the offer price - GBP1.75 - so traders at present are not convinced a competing offer is looming.

But might Amazon enter the fray? Although Amazon's stake was reduced to about 13% following Deliveroo's 2021 IPO - and then crept upward due to stock buybacks - its board may blanch at selling out the rest of its holdings at an enterprise valuation multiple of just 13. As Jefferies analyst Giles Thorne observes in a research note, there are some U.K. institutions who believe this is too low, and Amazon may agree.

Amazon did not return a message seeking comment on the DoorDash offer.

The food delivery business fits neatly within Amazon's overall U.K. strategy, and Prime membership brings with it a premium service from Deliveroo. In the U.S., Amazon has a similar arrangement with DoorDash.

With a market capitalization of almost $2 trillion, buying Deliveroo would be small change for Amazon. It has the financial muscle to compete successfully in any auction process. DoorDash, having just announced another $1.2 billion all-cash acquisition of privately-quoted hospitality technology provider, SevenRooms, may be constrained in the near future.

For DoorDash, capitalized at $87 billion, this acquisition is a strategic imperative given the consolidation taking place in the industry globally, its expansion plans and its focus on other Western markets like Canada, Australia and New Zealand. With Deliveroo and SevenRooms, DoorDash would combine most parts of the consumer chain from delivery, the dining, the loyalty programs and the data.

-Jules Rimmer

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May 06, 2025 09:33 ET (13:33 GMT)

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