Rocket-Backed Delivery Hero Eyes Year's Biggest German IPOBy and
Berlin-based food takeout service to list in Frankfurt
Analyst: Rocket ‘still has good companies in its portfolio’
Delivery Hero AG, the Berlin-based food-takeout business backed by Germany’s Rocket Internet SE, announced plans for Germany’s biggest initial public offering of the year to fund expansion in an increasingly competitive market.
Delivery Hero, about 35 percent owned by Berlin startup mill Rocket, plans to sell new shares worth about 450 million euros ($507 million) on the Frankfurt stock exchange in the next few months, the company said Tuesday in a statement. Existing investors will also sell shares, it said.
The IPO would give a much-needed reprieve to Rocket and its chief executive officer, Oliver Samwer, who hasn’t taken a startup 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.
Delivery Hero’s value was between 3.5 billion euros and 4 billion euros after a 387 million euro investment by South Africa’s Naspers Ltd. last month, according to a person familiar with the startup’s finances. Naspers owns about 10 percent.
On a conference call with reporters, CEO Niklas Ostberg said the majority of the Naspers cash "was reinvested into the company" already.
Delivery Hero operates a variety of brands including Lieferheld, Foodora and Foodpanda, through which it either brokers deliveries from restaurants or brings the food to customers’ homes itself. The company exited the U.K. and China last year.
A successful offering would be a boon to Germany’s venture capital community, which is trying to convert a flurry of startup activity in Berlin, Munich and elsewhere into exits for investors. Pizza and pasta franchise chain Vapiano SE 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.
Delivery Hero seeks the funds to have a "strong net cash position," grow organically and possibly also through mergers and acquisitions, Ostberg said.
“We want to grow as fast as we can and profitability comes with size,” Ostberg said. A prospectus due this month will add more detail on the IPO and its timing.
Rocket declined 1.7 percent to 21.13 euros at 1:20 p.m. in Frankfurt. Naspers was little changed 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 Ostberg in 2011 and purchased in part by Rocket in 2015, has continued "substantial investment in organic growth and acquisitions," it said Tuesday. It operates under a variety of brands in more than 40 countries.
Delivery Hero’s loss before interest, taxes, depreciation and amortization narrowed to 116 million euros in 2016, on a 70 percent sales increase to 347 million euros. Foodpanda, another Rocket property acquired last December, accounted for 45 million euros of the loss and last year and 50 million euros in sales.
Citigroup Inc., Goldman Sachs Group Inc., Morgan Stanley are acting as the joint global coordinators and bookrunners of the IPO, with UniCredit Bank AG, Berenberg, Jefferies and UBS as additional bookrunners.