You are here: Home » International » News » Companies
Business Standard

Amid competition, DoorDash buys Finnish delivery app Wolt in $8-bn deal

DoorDash's shares soared 24% in extended trading in New York after news of the deal and third-quarter results that beat analysts' estimates.

Food delivery | Startup

Jackie Davalos | Bloomberg 

Photo: Bloomberg
Photo: Bloomberg

DoorDash Inc. is hungry.

The biggest meal-delivery service in the U.S. said it’s buying Finnish food-delivery Wolt Enterprises Oy for about $8 billion as it seeks to stay ahead of rivals in the race to satisfy soaring demand for fast delivery of everything from food to prescriptions and pet supplies.

The all-stock deal is DoorDash’s biggest purchase to date, eclipsing the acquisition of Caviar in 2019. It’s the latest merger in the quickly consolidating food-delivery market, which has benefited handsomely during the pandemic, but where profits are elusive. Last year saw Europe’s Just Eat NV buy Grubhub for $7.3 billion while Uber Technologies Inc. snapped up Postmates Inc. for $2.65 billion.

Despite its meteoric rise in the U.S., DoorDash has been slow to expand internationally. The company’s first foray outside of North America was to Australia in 2019 and most recently Japan in June. San Francisco-based DoorDash has been searching 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 acceleration and expansion to play for a bigger prize on an even larger global stage,” said Tony Xu, co-founder and chief executive officer of DoorDash, in a conference call with analysts Tuesday.

While DoorDash’s growth in the U.S. has been largely organic, the company has taken a different approach to entering the crowded Continental market. It’s leading a fundraising round in German grocery delivery Flink SE after talks with Gorillas Technologies GmbH fell through in August.

“DoorDash was late to the game expanding internationally,” said Tom White, an analyst at D.A. Davidson. “Then again, they entered the sector somewhat late in the U.S. too and their playbook proved successful, so never say never.”

DoorDash’s shares soared 24% in extended trading in New York after news of the deal and third-quarter results that beat analysts’ estimates.

Founded in 2014, Helsinki-based Wolt operates in 23 markets across Europe, 22 of of which will be new to DoorDash and expand its footprint to 700 million customers, Xu said. Wolt has focused on mid-tier markets, branching out 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 U.K., where Uber launched in 2016.

“Wolt has a massive runway ahead and our partnership is setting the foundation for our 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 potential stock market listing next year. At the close of the acquisition, expected in the first half of 2022, Miki Kuusi, Wolt’s co-founder and CEO, will run DoorDash International, reporting to Xu.

Like DoorDash, Wolt has has expanded services beyond restaurant takeaway to delivering groceries and retail goods like pharmaceuticals. DoorDash has launched services across grocery, alcohol and pet supplies to capitalize on the shift in consumer behavior and hedge against a deceleration in pandemic-level growth. It’s bolstered partnerships with retailers like Bed Bath & Beyond Inc. and Ulta Beauty Inc. to provide same-day delivery for orders placed on their websites through its white-label product Drive.

“DoorDash and Wolt share a vision to build a global platform for local commerce that empowers the communities we operate in,” Xu said.

During the pandemic lockdowns, DoorDash quickly established itself as the dominant platform, commanding 57% of all sales in the U.S. as of September, according to Bloomberg Second Measure. Even as cities reopen and rising vaccination rates encourage people to return to in-person activities, customers’ craving for the convenience of ordering online hasn’t abated. DoorDash customers placed 347 million orders in the third quarter, a 47% increase from a year earlier, with the gross value of those orders at $10.4 billion.

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

While demand is clear, DoorDash and Uber have both been chasing profits. 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 reported its first-ever adjust profit in the third quarter, helped by Uber Eats, which boomed during the pandemic and helped offset a cratering of demand for ride-hailing. The company said last week that the delivery segment, which includes orders across restaurant, grocery and alcohol, has continued to grow despite indoor dining resuming, up 50% from a year ago to $12.8 billion in bookings.

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

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Wed, November 10 2021. 14:28 IST