Takeaway.com beats Delivery Hero in battle for German dominance

By Bart H. Meijer

AMSTERDAM (Reuters) - Online food delivery company Takeaway.com has won the long struggle for supremacy in the German market, agreeing to buy larger rival Delivery Hero's activities in the country in a 930 million euro ($1.1 billion) deal.

Shares in Dutch-listed Takeaway jumped 19 percent in early dealings, while Delivery Hero gained 14 percent after Takeaway agreed to buy the German food delivery businesses Lieferheld, Pizza.de and foodora in the cash and equity deal.

The deal ends an expensive battle for the German market between Dutch-based Takeaway and Delivery Hero, the world's biggest online food delivery firm, in which both firms spent heavily to build market share.

The acquisition "allows Takeaway.com to operate on a significantly larger scale, which is essential in building a profitable online food delivery business", Takeaway's CEO Jitse Groen said.

"There is still ample growth ahead, given that penetration of online food delivery in Germany is amongst the lowest in Europe."

The takeover will double business in Germany to an annual 47 million orders, said the Dutch company founded by Groen in 2000.

Takeaway, which claims to be the leading food deliverer in continental Europe, Israel and Vietnam, has argued that the online food ordering business will be highly profitable for just one player in each country.

DELIVERY COSTS

The business requires large investments in the food delivery service, which Takeaway views as a marketing tool rather than a potentially profitable business. Profit is to be made from the deals with restaurants whose food people order through Takeaway's platforms.

Takeaway said in October it expects to turn a profit on earnings before interest, taxes, depreciation and amortisation (EBITDA) by the third quarter of 2019.

Delivery Hero, which operates in the Americas and Asia as well as Europe, and is larger overall than Takeaway, does not expect to be profitable at the EBITDA level in 2019.

Takeaway will pay 508 million euros in cash, while Delivery Hero will also receive 9.5 million shares, worth 422 million euros, giving it an 18 percent stake in the company.

The deal, which needs to be approved by shareholders and is expected to close in the first half of next year, could create over 60 million euros in cost synergies by 2020, Takeaway said.

The company has committed debt financing of 680 million euros for the cash portion of the transaction in place, which it said it might refinance through the issuance of new shares.

($1 = 0.8722 euros)

(Additional reporting by Kanishka Singh in Bengaluru; Editing by Cynthia Osterman and Keith Weir)