DoorDash Inc. said it has agreed to acquire European food-delivery company Wolt Enterprises Oy in an all-stock deal valued at over $8 billion.
The deal marks the latest merger in the highly competitive food-delivery space, where revenue has skyrocketed during the coronavirus pandemic but profit has been elusive. Last year, Grubhub Inc. agreed to merge with Europe’s Just Eat Takeaway.com N.V., and Uber Technologies Inc. bought smaller rival Postmates Inc.
DoorDash said Wolt’s co-founder and chief executive, Miki Kuusi, would lead DoorDash’s overseas presence after the deal closes, which the companies expect in the first half of next year. Founded in 2014, Helsinki-based Wolt employs 4,000 people across 23 countries.
The merger sets up DoorDash, the biggest food-delivery app in the U.S., to compete with Uber Eats in Europe. DoorDash has increasingly sought to expand overseas after capturing a lion’s share of its home market during the health crisis. The company considered a deal with a German grocery-delivery business earlier this year, but talks fell apart, according to people familiar with the matter. DoorDash expanded into Japan in this year’s second quarter and will have a presence in 26 countries after the Wolt merger.
For us, this is “accelerating the state of play on a bigger, global stage,” DoorDash Chief Executive Tony Xu said in an interview.
Wolt isn’t a market leader in Europe, but Mr. Xu said he found the merger attractive because the startup has grown in what he considered a more cost-effective way compared with its peers. He added that it gives DoorDash a foothold to expand in a market that could have otherwise taken substantial time, effort and money for the company to penetrate on its own.
Wolt’s Mr. Kuusi said the company would continue operating under its brand in the countries where it currently does business. Messrs. Kuusi and Xu wouldn’t say how the combined entity would be branded in the countries it expands into.
Food delivery, already an expensive logistical undertaking, became costlier as companies across the globe invaded each other’s strongholds, flush with venture-capital money. Many companies consolidated during the pandemic in an attempt to rein in their costs.
DoorDash shares surged more than 20% in after-hours trading on the news.
San Francisco-based DoorDash announced the deal Tuesday in conjunction with third-quarter results. Revenue in the three months ended Sept. 30 rose 45% year over year to $1.28 billion, the company said, above the $1.18 billion average estimate of analysts polled by FactSet.
The pandemic made consumers more accustomed to ordering goods at the touch of a button, and DoorDash expanded into delivering everything from toothpaste to Tylenol and alcohol. It also expanded its logistics partnerships, delivering orders placed directly on the websites of retailers like Walmart Inc. and Macy’s Inc.
Although DoorDash hasn’t posted an annual profit since its inception eight years ago, it was the only major U.S.-based food-delivery platform to turn a quarterly net profit last year during the pandemic.
Executives at DoorDash and Uber Eats have spent the past year testing ways to deliver long-term growth and profit.
The company posted a $101 million net loss for the most recent quarter compared with a $43 million loss in the year-ago period.
DoorDash has been profitable on an adjusted basis before taxes, interest, depreciation and amortization for more than a year, giving it more leeway to expand overseas and build new business verticals without attracting the kind of scrutiny that rival Uber drew after posting hefty losses along the way. The company’s profit, by that measure, was $86 million in the latest quarter, on par with the prior year.
DoorDash said the Wolt merger next year could lead it to post a full-year profit by this measure of up to $500 million.
Regulatory snares are also complicating DoorDash and its American rivals’ efforts to become profitable, sustainable businesses.
Many U.S. cities temporarily capped the commissions DoorDash and others could charge restaurants during the pandemic, and some are considering making those caps permanent.
In September, DoorDash joined with Grubhub and Uber to sue New York City over its permanent commission-cap requirement. DoorDash and Grubhub are suing San Francisco over a similar requirement.
DoorDash has made some concessions in an attempt to appease restaurants. Earlier this year, the company said it would allow restaurants to choose from three commission rates, offering varying degrees of marketing and product support based on the selection.
Source: Mint