U.S. delivery service firm DoorDash has agreed to take over its British rival Deliveroo in a deal worth 2.9 billion pounds ($3.9 billion) that will further expand its global reach.
The deal, announced by the two companies Tuesday, will create a delivery service present in more than 40 countries, serving around 50 million monthly-active users.
The combined group "will bring together DoorDash's strong operating playbook with Deliveroo's local expertise to invest in innovation and execution at an even higher level," DoorDash chief executive Tony Xu said in a statement.
London-listed Deliveroo only posted its first annual profit in March following sizable full-year losses owing to high investment costs since American Will Shu founded the company in 2013.
The company's initial public offering (IPO) in 2021 had been London's biggest stock market launch for a decade, valuing the group at 7.6 billion pounds.
The offer from DoorDash is worth 1.80 pounds per share, less than half Deliveroo's IPO price of 3.90 pounds.
Shares in Deliveroo rose 2% to 1.75 pounds on Tuesday on London's second-tier FTSE 250 index, after already jumping in response to news of the takeover proposal last week.
Deliveroo experienced a surge in demand during the COVID-19 pandemic from lockdown-hit customers but increased competition has since led it to scale back global operations.
Most recently, Deliveroo exited Hong Kong amid growing competition in the Chinese city, following its exit from Australia and the Netherlands.
The deal is expected to be completed in the last three months of 2025, subject to regulatory approval and the approval of Deliveroo shareholders.
DoorDash, the largest food delivery app in the United States, entered the European market in 2021 with the purchase of Finland-based Wolt for $8.1 billion.
It is now looking to further expand its reach, with Deliveroo operating in the U.K., Belgium, France, Ireland, Italy, Kuwait, Qatar, Singapore and the United Arab Emirates (UAE).
For Deliveroo, it marks "the beginning of a transformative new chapter," said Will Shu, the company's chief executive.
It is the latest deal in the food delivery market, after Dutch investment group Prosus announced plans in February to buy Just Eat Takeaway.com for 4.1 billion euros.
San Francisco-based DoorDash said it has no plans to relocate Deliveroo's London headquarters.
It added that it does not anticipate making any changes that would impact the contracts of delivery drivers, or "riders."
As big players in the gig economy, food delivery apps have faced controversy over the status of their self-employed riders.
In late 2023, the U.K. Supreme Court ruled that Deliveroo riders were not entitled to trade union rights such as collective bargaining.
Deliveroo exited Spain after it became the first European Union nation to give food delivery riders labor rights, requiring that they be recognized as employees instead of being considered self-employed freelancers.
DoorDash in February agreed to pay out nearly $17 million to drivers in New York state, who accused the company of swindling them out of tip money.
