Amazon takes a slice of Deliveroo as it leads £450m investment round to send shockwaves through food delivery sector and spark Just Eat sell-off
- Amazon is leading an investment £450million investment round in Deliveroo
- The move sparked a 8% slump in Just Eat shares
- Amazon’s cash will help Deliveroo hire more staff and test out new concepts
Online juggernaut Amazon has sent shockwaves through the UK food sector today after deciding to plough millions into London-based delivery firm Deliveroo.
Jeff Bezos’s tech firm is leading a £450million ($575million) investment round in Deliveroo, joining existing investors Rowe Price, Fidelity and Greenoaks.
The stake takes the total raised by the fast-growing food firm to £1.2billion ($1.53billion).
Fast food wars: Deliveroo is a London-based, international food delivery company, founded in 2013 by Will Shu. It has taken the fight to FTSE-listed Just Eat
The City has been awaiting Amazon’s next move and trying to second guess when and how it would lay down the gauntlet in the UK food sector.
Amazon’s decision to back Deliveroo piles further pressure on its FTSE-listed rival Just Eat, which has also come up against fast-growing Uber Eats.
Just Eat’s shares slumped by more than 8 per cent to £6.22 today amid fears that the UK market leader may now struggle to keep up.
‘Given its financial firepower it is little wonder that Amazon effectively parking its tanks on Just Eat’s lawn is spooking investors,’ said AJ Bell investment director Russ Mould.
The cash injection from Amazon will allow Deliveroo to hire more engineers at its London headquarters, make improvements to its tech platform and test out new concepts, such as delivery-only kitchens.
Will Shu, who founded Deliveroo in 2013, said: ‘This is great news for the tech and restaurant sectors, and it will help to create jobs in all of the countries in which we operate.’
Amazon’s UK boss Doug Gurr said: ‘We’re impressed with Deliveroo’s approach, and their dedication to providing customers with an ever increasing selection of great restaurants along with convenient delivery options.
Deliveroo became very popular after it signed exclusive deals with chain restaurants like GBK and Zizzi. It has even been experimenting with alcohol delivery
‘Will and his team have built an innovative technology and service, and we’re excited to see what they do next.’
The deal has already sparked speculation that Amazon may one day attempt to buy Deliveroo.
It has also fuelled suspicions that Deliveroo is plumping for a stock market float.
The delivery firm became very popular after it signed exclusive deals with chain restaurants like GBK and Zizzi. It has even been experimenting with booze deliveries.
Last year, reports suggested that Deliveroo was in talks with ride-hailing company Uber over a possible tie-up, but discussions are thought to have stalled over differences in valuation.
At the time, just the threat of a newly created delivery giant sent Just Eat’s shares tumbling.
Micheal Hewson from CMC Markets said the backing from Amazon is a ‘shot across the bows’ of companies like Just Eat and Uber, as margins in the sector now face the prospect of being squeezed further.
‘This could be the thin end of the wedge and the beginning of an attempt by Amazon to broaden its delivery footprint, with respect to same day delivery, as well as expand its move into the food sector,’ he added.
Amazon had its own ill-fated attempt to break into this market – Amazon Restaurants UK – which started in 2016 but closed two years later.