On Wednesday, German publication WirtschaftsWoche (lit. “Business Week”) reported that Delivery Hero was in talks to sell its Southeast Asia business, including Singapore, Malaysia, Thailand, the Philippines, Cambodia and Laos. The report said that Grab was one of the potential buyers, and the price tag might be €1 billion (US$1.07b).
Delivery Hero confirmed that talks were ongoing, but mentioned that they were at preliminary stages.
Some of our thoughts:
- This is not a surprise. DeliveryHero has hinted in earnings calls that it would exit markets where it did not have a clear lead. Foodpanda has been on the defensive in most major Southeast Asian markets. According to Momentum Works’ Food Delivery Platforms in Southeast Asia 2023 report, whilst Foodpanda was the second largest platform in the region by GMV, in all its four major markets it is trailing behind Grab. In Thailand, its market share fell behind Line Man Wongnai as well;
- We have mentioned in the report that the food delivery platform business relies on volume, density and operational efficiency. Foodpanda’s strategy over the recent years to aggregate volume in smaller towns and countries was bold but debatable in effectiveness. It probably hopes to sell Cambodia and Laos business as a bundle with larger countries – but we doubt anyone would find value in those;
- Foodpanda’s other businesses in Asia include Pakistan, Bangladesh, Hong Kong and Taiwan. The latter two are dense, affluent societies which could be promising it Foodpanda focuses its attention to double down. However, Meituan subsidiary KeeTa is expanding steadily in Hong Kong – on Tuesday (19 June) KeeTa expanded to Hong Kong island, now covering 50% of Hong Kong’s population;
- Besides, DeliveryHero owns Korea’s Woowa Brothers, whose Baemin app contributes to more than 70% of the GMV in the Group’s Asia business and all the profit. Baemin has a subsidiary in Vietnam which has limited market share and has found it hard to break through the Shopee Food – Grab dominance there. Perhaps growing Taiwan and fortifying Korea are the best bets for DeliveryHero in Asia;
- The discussions over this potential sale seems to be in preliminary stages – but we do know such deals can happen very fast (read: Uber’s exit in China & SEA) if both the buyer and the seller can agree on the value of the acquisition. If Grab is the potential buyer, how much value would it see in the business, given that it is at an upper hand in both market share, and cash reserves. We have compared the net cash positions in this week’s Apples to Apples 3.0: benchmarking major tech platforms report:
- Foodpanda entered and exited Japan in very quick succession in 2021, but it has been in Southeast Asia for more than a decade – leaving by shutting down would be worse for its merchants and riders than Deliveroo’s hasty pullout of Australia. If DeliveryHero has assessed that the Southeast Asia market would no longer be a focus, an orderly exit through a sale would be the best course of action – that will also facilitate a quick and orderly transition for its riders and merchants.