German food delivery company Delivery Hero SE (DE:DHER) is offloading its stake in British food delivery provider Deliveroo PLC (GB:ROO) in a strategic move to improve its finances. Delivery Hero owns 68.2 million Class A shares of Deliveroo, representing 4.5% ownership. DHER will sell the entire stake and exit Deliveroo fully. Following the news, DHER stock was down 5.6% on Tuesday, while ROO shares fell 5.5% as of the last check.
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Under the accelerated share sale, Delivery Hero placed all its ROO shares at 113p per share with institutional investors to raise about GBP77 million. The price represents a discount to ROO’s closing share price of 121.90p on January 29. The transaction is expected to be completed on February 1. Delivery Hero will use the proceeds for general corporate purposes. DHER said that the final details of the accelerated share sale could be announced on Thursday.
Here’s More About DHER’s Stake Sale
Delivery Hero first took a stake in Deliveroo at the height of the pandemic in 2021, when the demand for home delivery companies was soaring, as customers queued up orders for food and grocery takeaways. However, the pandemic-driven craze for home delivery services has phased out lately. This has impacted both the share valuations and the performances of delivery companies. Moreover, delivery companies remain under pressure to improve their bottom lines amid rising interest rates and diminishing orders.
Delivery Hero has a debt burden that surpasses its cash position. The planned share sale will help the Berlin-based company liquidate some of its locked-up funds and meet its financial needs. Delivery Hero calls the share sale its “commitment to disciplined capital allocation.”
Is Delivery Hero Stock a Buy?
Following the share sale news, Citi analyst Monique Pollard reiterated a Buy rating on DHER shares with a price target of €38 (68% upside). The analyst is encouraged by Delivery Hero’s strategy to improve its liquidity position modestly.
Overall, with 12 Buys and one Hold recommendation, DHER stock commands a Strong Buy consensus rating on TipRanks. The Delivery Hero SE share price forecast of €53.82 implies 152.3% upside potential from current levels. DHER shares have lost over 60% in the past year.
