Shock as Amazon buys into UK takeaways with Deliveroo stake

Tech giant Amazon on Friday stunned the UK food world as it made a major investment in Deliveroo, valuing the home delivery group at £3 billion.

Deliveroo, which last year walked away from talks to be bought by Uber Eats, raised £450 million from backers including Amazon in what is its seventh major fundraising round.

Amazon’s move triggered feverish speculation about its intentions for the UK takeaway market. The owner of Whole Foods supermarkets set up Amazon Restaurants home delivery service in 2016 but wound it down amid competition from Deliveroo and Uber Eats.

Analysts said today’s move could lead to an outright takeover by Amazon, but even if not, its stake would give it an insight into Deliveroo’s operations, which prepare takeaways under Deliveroo’s own brands in residential areas.

The move spooked investors in market leader Just Eat, whose shares were the biggest fallers on the FTSE-100 Index, crashing 8%, or 56p, to 621p.

Deliveroo’s cash call takes the total amount it has raised to £1.2 billion, allowing it to beef up its tech arm at its HQ in the capital, lure new customers more quickly and build new kitchens. Existing backers T Rowe Price, Fidelity and Greenoaks also invested.

Will Shu, the co-founder and boss of Deliveroo, described Amazon as “an inspiration” adding: “We look forward to working with such a customer-obsessed organisation.”

His counterpart at Amazon UK, Doug Gurr, said: “We’re impressed with Deliveroo’s approach, and their dedication to providing customers with an ever increasing selection of great restaurants with convenient delivery options.”

Deliveroo employs 900 staff in London and operates in 14 countries. It held financing talks in 2017 with Tokyo-based Softbank, one of Uber’s major backers, but a deal never materialised. It remains loss-making and faced controversy over having its delivery riders self-employed rather than employees.

Peel Hunt analyst James Lockyer said: “Deliveroo is still in its pre-profit phase as it invests for growth. If any company knows about the benefit of that strategy it is Amazon.”