In what can only be perceived as an unexpected move in the food delivery industry, Berlin-based food delivery service, Delivery Hero, has signed a definitive agreement to acquire its main competitor, Foodpanda. The companies refused to disclose the financial terms of the acquisition at the moment, and the deal is expected to close before 31st December 2016.
It is worth mentioning that Rocket Internet, which is an investor in both firms said that the acquisition agreement will be funded by issuing new shares, boosting its equity stake in Delivery Hero to 37.7%.
Subsequently, many reports indicate that this acquisition will most likely help position Delivery Hero as a market leader in the Middle East and 20 new countries in Asia, Eastern Europe and MENA nations.
Rocket Internet had invested approximately $845 million in Delivery Hero last year and injected almost $317 million in Foodpanda business (which focuses on food deliveries in Asia, Middle East and Eastern Europe). Currently the combined group is currently processing approximately 20 million orders every month across 47 nations.
It is pertinent to note that Foodpanda had previously acquired Delivery Hero-backed food delivery service, TastyKhana, in November 2014 to acquire a competitive edge over other market players in the Indian market.
Many analysts believe that Foodpanda made a wise decision by agreeing to this acquisition as it has struggled to boost its sales in Asian countries, failing to create traction even in large markets like India
In any case, we are yet to see whether the acquisition deal will prove to be fruitful for both companies. We will be update this story as soon as the companies disclose the financial terms of the acquisition agreement.