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Rocket-Backed Delivery Hero Targets $500 Million in IPO

Published on Jun 6 2017 10:00 AM in Restaurant tagged: Pizza / Deliveroo / Rocket Internet / Delivery Hero / Citigroup

Rocket-Backed Delivery Hero Targets $500 Million in IPO

Delivery Hero, a Berlin-based food takeout business backed by Germany’s Rocket Internet, announced plans to list on the Frankfurt stock exchange in the next few months to fund expansion in an increasingly competitive market.

Delivery Hero, about 35 percent owned by Berlin-based startup mill Rocket, plans to sell new stock worth about €450 million in the initial public offering. Existing investors will also sell shares, the company said Tuesday in a statement.

The IPO would give a much-needed reprieve to Rocket and its chief executive officer, Oliver Samwer, who has been trying to take another startup from his investment stable public since European apparel e-tailer Zalando SE listed in 2014. Rocket stock heading into this week had fallen by about 50 percent since its own IPO two and a half years ago and Samwer has been under pressure to show his investment company can generate more hits.

"A Delivery Hero IPO is an important event for Rocket Internet because it’s a way to prove it still has good companies in its portfolio,” said Lucas Boventer, a Warburg Research analyst who recommends buying Rocket shares. An offering that values the takeout business above 3.5 billion euros would be viewed "positively" by investors, he said.

Takeout Competition

Delivery Hero’s value was between €3.5 billion and €4 billion after a €387 million investment by South Africa’s Naspers last month, according to a person familiar with the startup’s finances. Naspers owns about 10 percent.

Rocket Internet rose as much as 1.9 percent in early Frankfurt trading. Naspers was little changed shortly after market opening in Johannesburg.

Delivery Hero competes with app-takeout services including Just Eat Plc, GrubHub Inc. and Takeaway.com Holding BV. Newer rivals include Amazon.com Inc., which is expanding its Amazon Fresh same-day grocery delivery offering, and Uber Technologies Inc.’s food-on-wheels service Uber Eats.

That means Delivery Hero is spending heavily to grow. The company, founded by its Swedish Chief Executive Officer Niklas Östberg in 2011 and purchased in part by Rocket in 2015, has continued "substantial investment in organic growth and acquisitions," it said today. It operates under a variety of brands in more than 40 countries.

Delivery Hero posted a loss before interest, taxes, depreciation and amortisation of 116 million euros on sales of €347 million. The Foodpanda unit, another Rocket property Delivery Hero acquired last December, accounted for €45 million of that loss on sales of €50 million, according to the company.

In 2015, Delivery Hero lost €175 million on sales of €203 million. It also operates under brands including Lieferheld in Germany and Foodora, and exited the UK and China last year.

The offering would rank as the biggest largest IPO this year in Germany, which is trying to convert a flurry of startup activity and venture capital investing in Berlin, Munich and elsewhere into exits for investors. Pizza and pasta franchise chain Vapiano last week announced plans to list in Frankfurt in a $95 million offering this summer, preceded by four other offerings, one of which has been postponed, according to data collected by Bloomberg.

Citigroup Inc., Goldman Sachs Group Inc., Morgan Stanley are acting as the joint global coordinators and bookrunners of the offering, with UniCredit Bank AG, Berenberg, Jefferies and UBS as additional bookrunners.

News by Bloomberg, edited by Hospitality Ireland

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