Deliveroo eyes $10.5 billion listing after some funds steer clear

(Reuters) – Deliveroo will price its initial public offering at 390 pence per share, banks working on the deal said on Tuesday, at the bottom end of previously indicated valuations for the food delivery group.

That would indicate a valuation of 7.6 billion pounds ($10.46 billion), less than expected, after a string of major UK fund managers said they would not take part in the deal, citing concerns about its dual class share structure and its gig economy business model.

The listing is covered multiple times over, the bookrunners said, with the deal expected to close at 1200 GMT.

The listing of London-based company, founded by boss William Shu in 2013, is set to be London’s biggest IPO since Glencore’s in May 2011 and also the biggest tech float on the London Stock Exchange.

Heavyweight investors Aberdeen Standard Life, Aviva, Legal & General Investment Management and M&G have all said they will sit the deal out, amid criticism of its workers’ rights.

Some of them also question whether the loss-making business can ever justify its valuation.

Having initially looked for up to 8.8 billion pounds, the British tech firm on Monday went with a narrower price range, indicating a maximum valuation of up to 7.85 billion pounds.

Deliveroo’s self-employed drivers have seen a boom in demand during the COVID-19 pandemic, bringing food from otherwise-shuttered restaurants to housebound customers.

($1 = 0.7266 pounds)

Deliveroo flotation price to be at bottom of target range

Food delivery business Deliveroo has said it will price shares for its stock market listing towards the bottom of its planned range.

Deliveroo now expects to be valued at between £7.6bn and £7.85bn, whereas its original price range had indicated it could be valued at up to £8.8bn.

It said it had chosen the lower price due to “volatile” market conditions.

Last week, a number of fund managers said they would reject the listing amid concerns over workers’ rights.

‘Significant demand’

Deliveroo’s planned share sale has attracted much attention as it could be the UK’s biggest flotation for a decade.

Last week, the company it estimated a price range of between £3.90 and £4.60 per share for the float on Wednesday.

However, on Monday it trimmed the price range to between £3.90 and £4.10 per share.

In a statement, it said: “Deliveroo has received very significant demand from institutions across the globe.”

It added that the deal is covered multiple times throughout the range, “led by three highly respected anchor investors”.

Deliveroo's chief executive Will Shu
image captionDeliveroo’s chief executive, Will Shu, founded the business in 2013

But referring to “volatile global market conditions for IPOs”, Deliveroo said it was “choosing to price responsibly within the initial range and at an entry point that maximises long-term value for our new institutional and retail investors.”

The move comes after a number of US tech stocks fell below their issue prices after IPOs in recent weeks.

Fund worries

Despite the size of Deliveroo’s flotation, last week a number of leading fund managers said they would reject the listing.

Managers such as Legal & General, Aviva, Aberdeen Standard and M&G expressed concerns over workers’ rights, the company’s business model and regulatory concerns.

Rupert Krefting, head of corporate finance and stewardship at M&G, said the company’s reliance on gig-economy workers made it a risk for investors.

Deliveroo riders are self-employed, meaning they are not entitled to earn a minimum wage from the company, or holiday and sick pay.

David Cumming, chief investment officer at Aviva, warned of the risk that drivers will have to be reclassified as workers, which would entitle them to rights such as sick and holiday pay. “It’s an investment risk if the legislation changes,” he said.

One backer of takeaway delivery platforms is James Anderson, manager of the UK’s largest investment trust Scottish Mortgage.

He told The Times that he was “lukewarm” about Deliveroo because of its focus on slower-growing markets and its over-reliance on London.

“I think their model is successful in the unusual economics of London and it’s much more difficult to spread elsewhere,” he said.

Investment firms have also raised concerns over the proposed share structure, which will see founder Will Shu have 20 votes per share, compared with one per share for other investors, giving him a majority position in shareholder votes.

Deliveroo, which was founded in 2013, has said it will hand its riders bonuses of between £200 and £10,000 when it floats, depending on the number of orders they have delivered.

Trade union calls for Deliveroo UK riders strike to highlight IPO risks

LONDON (Reuters) – A trade union called for Deliveroo’s UK riders to strike when the meal delivery service floats on the stock market next month, saying on Sunday the action would highlight dissatisfaction with the company’s business model and approach to workers’ rights.

Deliveroo, whose turquoise-uniformed couriers delivering chicken kormas and American hot pizzas are a common sight in many British suburbs, is set for Britain’s biggest stock market debut in nearly a decade after setting a share price range that values it at up to $12 billion.

But some investment firms have said they will not participate in the initial public offering (IPO). Insurer Aviva for instance highlighted a lack of rights for riders as an investment risk as the company might be forced to change its business model.

Deliveroo said investor demand had continued to build since its roadshow began on Monday, and said the views of the union which announced the strike, the Independent Workers’ Union of Great Britain (IWGB), did not represent the vast majority of riders.

The IWGB previously lost a legal challenge to Deliveroo in 2018. The case sought to secure rights such as the UK minimum wage for riders, but the court ruled riders were self-employed.

“Investing in Deliveroo means associating yourself with the exploitative and unstable business model,” IWGB President Alex Marshall said in a statement, adding the strike was planned for April 7, to coincide with the IPO.

The rights of people who work in the so-called “gig economy” have been an increasing focus in Britain. Ride-hailing app Uber gave its workers more entitlements earlier this month after losing a Supreme Court case.

Deliveroo said job satisfaction levels among its 50,000 self-employed riders in Britain was at an all-time high, and that the flexibility they had was a big attraction.

“Thousands apply to work with us every week, reflecting the strong demand for our on-demand model,” a company spokeswoman said.

Investment risks: Deliveroo loses top investors

Six big UK investment firms say they will not buy Deliveroo shares after concerns over workers’ rights.

The delivery company hopes to be valued at up to £8.8bn when it lists its shares in April.

But Aberdeen Standard, Aviva Investors, BMO Global, CCLA, LGIM and M&G said they were put off by factors including the working conditions of its riders and lack of investor power.

Deliveroo said it had seen “significant demand” for stock with interest rising.

“We look forward to welcoming new shareholders next week alongside our currently highly respected existing investors,” it added.

Deliveroo riders are self-employed, meaning they are not entitled to earn a minimum wage from the company, or holiday and sick pay.

‘Time bomb’

Rupert Krefting, head of corporate finance and stewardship at M&G, said the company’s reliance on gig-economy workers made it a risk for investors.

He pointed out that Uber had recently had greater legal rights enforced by the Supreme Court for drivers previously categorised as self-employed.

“Deliveroo’s narrow profit margins could be at risk if it is required to change its rider benefits to catch up with peers,” Mr Krefting added.

Legal & General Investment Management (LGIM) said it was put off by an “unequal voting rights” structure.

Deliveroo is planning to let its founder and chief executive Will Shu have more than 50% of shareholder voting rights.

“It is important to protect minority and end-investors against potential poor management behaviour, that could lead to value destruction and avoidable investor loss,” LGIM said.

Phil Webster, a portfolio manager at BMO, said labour issues represented a “ticking bomb on the side” for Deliveroo, which contributed to making it “uninvestable”.

Andrew Millington, head of UK Equities at Aberdeen Standard, told the BBC’s Today programme that the conditions were a “red flag”, adding: “We wouldn’t be comfortable that the way in which its workforce is employed is sustainable.”

He compared Aberdeen Standard’s recent decision to sell off Boohoo shares, following allegations of worker exploitation at suppliers to the online clothing company.

Large institutional investors such as Aberdeen Standard can use their financial muscle to try to influence the way firms are run – such as through relationships with managers and shareholder votes.

But Mr Millington said that sometimes “disinvesting or not investing in the first place is our only option”.

He added that it would be interesting to see whether Deliveroo can attract investors over the longer term “without making progress” on worker rights.

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Analysis box by Dominic O'Connell, business correspondent

One of the biggest-ever floats on the London market of a home-grown technology company should have meant a feeding frenzy among the City’s institutional investors, the companies that have the job of putting trillions of pounds of retail and pension investors money to work. 

For years they have watched with envy as their US counterparts have put cash into a steady stream of technology companies.

Not all have been big hits after listing their shares on public markets, but enough of them have been – think Apple, Alphabet, Amazon, Tesla and a string of others – to have made it a big source of investment returns. Deliveroo’s listing, which could value the company at just short of £9bn, should have been a rare similar opportunity on the London market.

Instead some big players, including Aviva Investors and Aberdeen Standard, are turning their backs, saying the way the company employs its riders is not socially acceptable, and poses a risk to its future.

Deliveroo deems its riders to be self-employed, and points out that the High Court has upheld that view. What is more, Deliveroo says its riders value the flexibility that employment status gives them, although it is worth noting that Uber maintained the same thing until it eventually decided its drivers were in fact workers, not self-employed contractors.

There is no danger to Deliveroo’s float – there are enough investors around who are happy to buy the shares. The buying strike by large investors could have ramifications well beyond one company, however. Does this mean that all gig economy companies are off limits? Does it signal that all companies on the London market will now have to ensure their worldwide organisations meet the best employment standards?

Andrew Millington of Aberdeen Standard told the Today programme that would be the battle to come – that his firm would hold on to a company’s shares as long as it was moving in the right directions, and paid proper attention to employment standards. That is a subtle warning to boardrooms that they will in future be judged by the way their treat their most junior staff.

David Cumming, chief investment officer at Aviva, said investors were taking social responsibilities “a lot more seriously”.

“A lot of employers could make a massive difference to workers’ lives if they guaranteed working hours or a living wage, and how companies behave is becoming more important.”

A report by the Bureau of Investigative Journalism (BIJ) – based on thousands of invoices from 300 Deliveroo riders – claims that one in three is earning less than the National Living Wage, which is currently £8.72 an hour.

However, Deliveroo said the sample of 300 people was “not a meaningful or representative proportion” of their riders and that they can earn up to £13 an hour “at our busiest times”.

“These findings [by the BIJ] raise concerns,” said Tom Powdrill, head of stewardship at shareholder lobby group Pirc. “Investors considering taking a position in Deliveroo should familiarise themselves with these matters and the risks and responsibilities involved along with all other relevant factors.”

Investment risk

Mr Cumming also warned of the risk that drivers will have to be reclassified as workers, which would entitle them to rights such as sick and holiday pay. 

“It’s an investment risk if the legislation changes,” said Mr Cumming. 

Uber recently reclassified its drivers as workers after a landmark UK supreme court case last month.

Deliveroo's chief executive Will Shu
image captionDeliveroo’s chief executive, Will Shu, founded the business in 2013

Since losing a five-year legal battle with drivers who claimed it had wrongly classified their employment status, Uber has offered holiday pay, a guaranteed minimum wage, and pensions benefits to its drivers.

Other gig economy companies have been looking closely at the Supreme Court’s verdict in February, although it does not directly apply to Uber Eats – the food delivery arm of the business.

‘Punctured profits’

Deliveroo has set aside more than £112m to cover potential legal costs relating to the employment status of its delivery riders.

It warned potential investors of the risk of litigation around the world in documents setting out its plans for a stock market debut published on Monday.

“The European Commission is set to draw up new legislation governing how the gig economy model works across the bloc,” pointed out Susannah Streeter, an analyst at Hargreaves Lansdown.

“If Deliveroo is forced to change the way it classifies its riders in the future, it is likely to puncture its profits prospects, and could even derail the delivery giant.”

Deliveroo, which was founded in 2013, has said it will hand its riders bonuses of between £200 and £10,000 when it floats, depending on the number of orders they have delivered.

China’s Meituan reported quarterly loss as it expands into new area

BEIJING (Reuters) – Chinese food delivery company Meituan reported a loss on Friday for October-December after two consecutive quarters of profit, as it expanded into the community group-buying business that relies heavily on subsidies.

It reported a loss of 2.24 billion yuan ($343 million) versus profit of 1.46 billion yuan in the same month a year earlier, the company said in a stock exchange filing.

Meituan, whose services also include restaurant reviews and bike sharing, said total revenue rose 34.7% in October-December from a year earlier to 37.92 billion yuan ($5.80 billion). That compared with the 39.17 billion yuan average of 14 analyst estimates, IBES data from Refinitiv showed.

Community group buying, which lets communities set up groups for bulk buying, is one of Meituan’s new initiatives that grew by 51.9% year-on-year in quarterly revenue to 9.24 billion yuan.

Food delivery, which accounts for over half of Meituan’s total revenue, posted revenue growth of 37.0% to 21.54 billion yuan. Its in-store, hotel and travel operation saw revenue growth of 12.2% to 7.14 billion yuan.

($1 = 6.5417 Chinese yuan renminbi)

Deliveroo eyes $12 billion market cap in upcoming IPO

LONDON (Reuters) – Food delivery company Deliveroo could make Britain’s biggest stock market debut since commodities giant Glencore went public nearly a decade ago, after setting a price range on Monday that values it at up to $12 billion.

The Amazon-backed food delivery firm has been held up by the British government as a sign the City of London can still attract major Initial Public Offerings (IPO) following the United Kingdom’s exit from the European Union.

It is set to be London’s biggest IPO since Glencore in May 2011, according to data provided by the London Stock Exchange.

A London stock market listing by Allied Irish Banks in 2017 is excluded from the data as it had a small listing in Ireland at the time.

Deliveroo will also be the biggest tech IPO on the LSE, dwarfing The Hut Group from last year — which had a 5.4 billion pound market capitalisation at time of listing — and the since-delisted Worldpay Group from 2015.

The company has benefited from the closure of restaurants for anything other than takeaways during the COVID-19 crisis and revenues have soared accordingly, with so-called gross transaction value – which measures the total value of orders received – rising 64.3% in 2020 to 4.1 billion pounds.

But it faces questions on whether that momentum will continue after COVID-19 restrictions are eased and be enough to turn the business towards profit after it posted an underlying loss of 223.7 million pounds ($308.93 million) last year.

“Deliveroo has clearly had a Covid boost,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

“Although this insatiable demand for takeout food isn’t likely to fully unravel, there is inevitably going to be a drop in demand as diners seize the opportunity to book tables at their favourite eateries when restrictions do ease.”


Deliveroo said it had set a price range for its listing of between 3.90 and 4.60 pounds per share which will give it a market value of between 7.6 billion pounds and 8.8 billion pounds ($10-5 billion and $12 billion), excluding any shares offered as part of an over-allotment issue.

An announcement to investors seen by Reuters said that the deal size would be 1.5-1.6 billion pounds, rising to 1.7 billion pounds after the over-allotment of shares.

Of this, new shares will raise 1 billion pounds for the company and the rest will be made up by existing shareholders selling part of their stake.

Deliveroo has opted not to pursue a premium listing — ruling it out of inclusion in the FTSE indices — which allows founder and chief executive Will Shu to retain enhanced shareholder rights.

In a short trading update, Deliveroo added that the total gross transaction value on its platform was up 121% in January and February this year compared to the same period in 2020.

“We have seen a strong start to 2021 and we are only at the start of an exciting journey in a large, fast-growing online food delivery market, with a huge opportunity ahead,” Shu said in a statement.

JP Morgan and Goldman Sachs are global coordinators and bookrunners along with Bank of America, Citi, Jefferies and Numis.

($1 = 0.7214 pounds)

More than beans: Nestle recycles cocoa fruit waste to replace sugar in chocolate

ZURICH (Reuters) – As confectionery groups scramble to reduce added sugar, chocolate sweetened with cocoa fruit pulp is about to hit supermarket shelves with food giant Nestle ready to launch its “Incoa” bar.

Using cocoa fruit pulp, which is normally discarded, to flavour products reduces sugar and cuts food waste while boosting the income of cocoa farmers who can “upcycle” their cocoa by selling both the pulp and the beans.

That ticks several boxes with health- and environmentally-conscious consumers.

“This is a big launch, we give it to all the customers who want it and don’t limit supplies,” Alexander von Maillot, Nestle’s global head of confectionery, told Reuters this week.

The company is launching Incoa, which has no added sugar, in supermarkets in France and the Netherlands with other European markets to follow.

Nestle is sourcing the raw material from cocoa farms in Brazil, but also working with partners in West Africa to see if pulp production could work there. Von Maillot said cocoa farmers could boost their income by 20-40% if they also sold the pulp.

Lamine Keita, a cocoa farmer in Duekoue, Ivory Coast, said he hadn’t yet been asked to sell cocoa fruit pulp. “If we can sell more than the beans to increase our income, that’s all we can ask for because beans alone are not enough to get us out of poverty,” he said.

Jerome Koffi, who cultivates cocoa on four hectares of land in Soubre, also said he’d gladly sell more, but at the moment there was only demand for beans.

Fruit pulp doesn’t come cheap – Incoa bars on Dutch retailer Albert Heijn’s website cost about 50% more than other dark chocolates. But Von Maillot said although the cost meant pulp was not suitable for replacing sugar in mainstream products, there may be other uses for cocoa fruit chocolate, for example in baking.


Lindt & Spruengli and Germany’s Ritter Sport have also launched limited editions of cocoa fruit chocolate which sold out quickly. Both said they planned to launch the products on a larger scale once enough cocoa fruit was available.

Swiss chocolate maker Felchlin’s cocoa fruit preparation found its way into macarons and truffles that high-end chocolatier Spruengli – unrelated to Lindt – called a “world novelty”.

Lindt and Felchlin source cocoa fruit pulp from Swiss-Ghanaian startup Koa, which uses solar-powered mobile units to process fresh pulp from 1,600 small farmers. Koa is able to process 250 tonnes a year but wants increase its capacity 10 fold within the next two years.

Industry major Barry Callebaut, meanwhile, is getting ready to supply its WholeFruit Chocolate to chefs and artisans. It has also set up a dedicated brand, Cabosse Naturals, to sell cocoa fruit ingredients to customers like Mondelez International to use in fruity snacks.

The Upcycled Food Association said commercialising cocoa fruit worldwide could reduce greenhouse gas emissions by more than 20 million tonnes per year. It defines “upcycling” as using food ingredients that humans wouldn’t consume, with verifiable supply chains and a positive environmental impact.

Brigette Wolf, head of Mondelez’s SnackFutures, said upcycling appealed to those who want to “make an impact” with their food choices.

The company plans to have three varieties of CaPao Cacaofruit Fruit Bites on sale this year, in more than 2,000 stores by the end of 2021 or early 2022.


Commodities specialist Tedd George said extracting additional value from the crop could boost West Africa’s cocoa sector because current incentives were only focused on growing and selling more beans.

“There’s an opportunity for new products made from cocoa fruits to also be health products and that changes the game for the value you can get out of them,” he said, citing health benefits associated with dark chocolate.

Nestle has been repositioning itself as a health and wellbeing company, reducing sugar in its products, and has also set sustainability targets including for cocoa.

George said the launch of cocoa fruit products didn’t address fundamental issues like child labour or deforestation, but could fuel investment and drive change in cocoa-producing communities.

He said companies should also develop cocoa products for African tastes. “If there was also local demand for cocoa, that would boost farmers’ pricing power.”

Exclusive – Deliveroo aims to sell $1.4 billion of new shares – IPO

LONDON – British food delivery company Deliveroo said on Monday that it plans to sell around 1 billion pounds ($1.39 billion)of new shares in its upcoming initial public offering.

The company, which is backed by Amazon, said its listing will also include the sale of shares by some existing shareholders.

Deliveroo confirmed that it will have two classes of shares, with founder and chief executive Will Shu to be the sole holder of “class B” stock which will give each of his shares 20 votes, whilst all other shares will carry one vote.

($1 = 0.7185 pounds)

The Restaurant Group: Wagamama owner to raise millions as lockdown bites

The owner of Wagamama is seeking to raise millions of pounds after many of its restaurants had to close their doors amid lockdown restrictions.

The Restaurant Group (TRG) will seek to raise £175m from its shareholders to pay down debt and use as a buffer in case of any Covid resurgence.

Its boss said the pandemic had presented “enormous challenges” for the sector.

Total sales dropped by 57% to £459.8m in 2020 as many TRG sites were closed.

Dented sales and pandemic costs meant the group, which also owns other restaurant chains such as Frankie & Benny’s, reported a £127.6m pre-tax loss last year, compared to a £37.3m loss in 2019.

It added that its short-term outlook remains “uncertain” while lockdown restrictions remain in place.

Chief executive Andy Hornby said that TRG has “responded decisively” to restructure the businesses while preserving the “maximum number of long-term roles for our colleagues”.

“Whilst the sector outlook remains uncertain, and we are mindful of continuing restrictions across the UK, we are confident that the actions announced today will allow us to emerge as one of the long-term winners.”

Under the prime minister’s current “roadmap” for easing lockdown restrictions, hospitality venues will be able to reopen for customers dining outside 12 April at the earliest, with indoor dining set for 17 May.

During the pandemic, TRG started a major restructuring, closing about 250 sites, which largely affected staff across its Frankie & Benny’s, Chiquito and Food & Fuel brands.

It also tapped investors for cash last April, raising £54.6m from a share placing.

The firm, which now has about 400 restaurants, pubs and concessions, said the additional funds it planned to raise would be the “last step” in the restructuring plan as it prepares to reopen sites once restrictions lift.

It said Wagamama delivered “exceptional” like-for-like sales growth when it was open for dine-in trading and that the Wagamama restaurants operating takeaways and delivery services saw sales two and a half times higher than pre-Covid levels.

But Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said that it could take some time for pent-up demand to “unleash” as restaurants reopen.

“Many of The Restaurant Group’s sites have limited outdoor seating so are unlikely to fully benefit from the phased opening of the hospitality industry from 12 April,” she said.

“The cash injection from this latest rights issue will give it some breathing space but there may well be more restructuring pain to come, as a slimmed down version of Restaurant Group emerges from the crisis.”

Takeaways take off

Separately, the owner of delivery giant Just Eat said on Wednesday that it expected orders to ramp up further in 2021.

Dutch-based Just Eat reported a sharp increase in sales of €2.4bn (£2bn) in 2020, up 54% from €1.6bn the previous year. It said this was due to a 42% leap in online orders.

UK food orders increased 35% over the year and the group said this had accelerated further under current lockdown measures.

Just Eat Takeaway riders outside of a McDonald's outlet.
image captionMcDonald’s and Greggs orders have proven popular with UK customers during lockdown.

Just Eat Takeaway said UK orders were 88% higher in the first two months of 2021, with delivery orders up by more than 600% compared with a year earlier.

Partnerships with chains such as Greggs and McDonald’s were particularly popular with UK customers, it added.

However, despite the high demand for home deliveries, the platform reported a pre-tax loss of €147m euros against €88m in 2019. It said the figure reflected costs associated with the group’s takeover of GrubHub in the US and the merger of Just Eat with

Richard Hunter, head of markets at Interactive Investor, added that a “number of potential clouds” could be on the horizon for the group.

“Competition in the space is intense and, in the post-pandemic world, it is impossible to guarantee that its business model will continue to generate such strong growth as the easing of lockdown restrictions allow the global population to visit restaurants in person once more,” he said.

Conagra in talks to sell hot dog brand Hebrew National to JBS: WSJ

(Reuters) – Slim Jim beef jerky maker Conagra Brands Inc is in talks with Brazilian meat processor JBS SA to sell its Hebrew National hot dog brand, the Wall Street Journal reported, citing people familiar with the matter.

A deal, which could also include the liquid egg white brand Egg Beaters and sausage product brand Odom’s Tennessee Pride, could be valued at around $700 million, the people said.

Any agreement, however, is likely weeks away and Conagra could end up keeping the business or selling it to someone else, the people told the financial newspaper.

Food companies are looking to reshape their portfolios as a pandemic-driven surge in at-home eating gives a boost to companies’ balance sheets and revives sales of slower-growth brands, which they will use as tools to fetch better-than-normal valuations, Credit Suisse analysts wrote in a note in December.

Conagra, in particular, might consider divesting some of its $1.0 billion in refrigerated brands due to its lack of scale in the refrigerated section and also because it wants to take advantage of a $680 million tax asset to offset capital gains that expires in 2021, the brokerage had said.

Hebrew National has been one of Conagra’s top performing brands during the pandemic and has generated “strong” organic sales growth over the past two quarters.

Credit Suisse estimates that the brand brings in $200 million in sales annually, while Egg Beaters generates $45 million.

If a deal goes through, it will mark Chicago-based Conagra’s third deal in the past six months. In September, the nearly $18 billion company sold its HK Anderson food business to UTZ Quality Foods LLC, and in December, it sold its Peter Pan peanut butter business to Post Holdings.