Delivery Hero Says Talks to Sell Foodpanda Have Failed

Andrew Pollack and Agatha Cantrill, Bloomberg News

Signage for Delivery Hero SE at the company's headquarters in Berlin, Germany, on Sunday, Aug. 21, 2022. Delivery Hero is among the biggest gainers in the Stoxx Europe 600 Index this quarter, up 46% since June 30, as the company takes out some of investors’ most dire concerns one by one. Photographer: Krisztian Bocsi/Bloomberg , Bloomberg

(Bloomberg) -- German food delivery group Delivery Hero SE said negotiations to sell part of its Foodpanda business in some markets in Southeast Asia have failed after it couldn’t reach a final agreement on deal terms.

The company had confirmed on Feb. 2 that talks to sell the business in Singapore, Malaysia, the Philippines, Thailand and other countries were continuing. Those discussions have ended, Delivery Hero said Wednesday in a statement.

Business in Asia, Delivery Hero’s largest market, has stagnated since pandemic-era lockdowns eased. In September, the company said it was in talks to sell the Foodpanda brand in some countries in Asia without naming potential buyers.

The shares fell 7% to €21.07 at 10:09 a.m. in Frankfurt trading after earlier dropping as much as 10% on Thursday. The stock has declined 14% this year.

Delivery Hero’s Chief Executive Officer Niklas Oestberg said in a press release that the decision to terminate negotiations was taken with “careful consideration” after the Asian business showed strength in the final quarters of last year.

Speaking to Bloomberg earlier this month, Oestberg said that while Asia was lagging about a year behind other regions in rebounding from a post-Covid slump, he sees the growth pattern normalizing to pre-pandemic levels.

“Now we can run it without it being a heavy drag down on our profitability,” Oestberg said.

Delivery Hero’s termination of talks with Grab to sell the unprofitable assets of Foodpanda’s Southeast Asia businesses — likely due to valuations — raises concerns about reaching its €725-€775 million 2024 Ebitda target. Management stated earlier there’s no urgency to sell, with sufficient liquidity in place (about €1.55 billion in cash at the end of January) even after repaying almost €4 billion in convertible bonds, and with the APAC business expected to have reached Ebitda breakeven in 4Q23.

Tatiana Lisitsina, Bloomberg Intelligence retail analyst

Southeast Asia’s biggest ride hailing companies, Grab Holdings Ltd. and GoTo Group, restarted talks about potential combinations of their businesses, people familiar with the matter said earlier this month.

Around the same time, a report from Malaysian newspaper New Straits Times said that Delivery Hero’s talks to sell part of the Foodpanda business to Grab had collapsed, citing people familiar with the matter. Delivery Hero at the time denied that talks to offload the operations had failed.

(Updates with CEO comments and shares)