Delivery Hero to Spin Off Middle East Business Talabat and Float it on Dubai Stock Exchange
European food delivery giant Delivery Hero has announced its plans to spin off its Middle Eastern business, Talabat, and list it on the Dubai Financial Market in the fourth quarter of this year. This move reflects the company’s strategic decision to tap into the growing market potential of the Middle East region and attract local investors while retaining majority ownership of the subsidiary.
Key Takeaways:
- Strategic Expansion: The proposed Talabat IPO aligns with Delivery Hero’s ambition to solidify its presence in the Middle East, a key growth region for the company.
- Local Investor Involvement: The listing aims to attract regional investors, leveraging their knowledge of the local market and providing valuable support to the Talabat business.
- Financial and Strategic Benefits: The IPO is expected to yield both financial and strategic benefits for Delivery Hero, allowing it to further invest in Talabat’s growth while simultaneously generating revenue from a secondary share sale.
- Market Conditions: The success of the Talabat IPO remains contingent on favorable market conditions, regulatory approvals, and approval from Delivery Hero’s management and supervisory boards.
A Growing Region for Delivery Hero
Delivery Hero CEO Niklas Ostberg emphasized the significance of the Middle East market, highlighting its sizeable contribution to the company’s revenue stream. In the second quarter of 2023, the Middle East and North America region generated 28% of the firm’s overall sales, making it Delivery Hero’s second-largest market.
Talabat has established a strong foothold in the Middle East, operating across nine countries, including:
- Bahrain
- Egypt
- Iraq
- Jordan
- Kuwait
- Oman
- Qatar
- Saudi Arabia
- United Arab Emirates
Talabat’s Performance and Growth
The company’s performance in the region underscores its robust growth potential. In the second quarter of 2023, Talabat’s revenue surged by 37% year-over-year to 874.7 million euros. This growth trajectory demonstrates the significant appeal of food delivery services in the Middle East, driven by increasing urbanization, digital adoption, and shifting consumer preferences.
This strategic spin-off and planned IPO signify not only a commitment to the Middle Eastern market but also an acknowledgment of its significant growth potential.
Delivery Hero’s Openness to Strategic Value-Accretive Opportunities
Although Ostberg declined to comment on whether Delivery Hero is considering further asset sales or IPOs of individual units, he emphasized the company’s openness to explore "value-accretive opportunities" that align with its financial and strategic goals. This statement suggests that Delivery Hero may be considering other strategic moves to optimize its portfolio and maximize value for its shareholders.
Implications for the Future: A Look Ahead
The proposed Talabat IPO is a significant development in the food delivery landscape. It demonstrates the increasing attractiveness of the Middle Eastern market to global players and signals a trend toward localization and partnerships with regional investors.
Industry analysts expect that Delivery Hero’s decision, in conjunction with the growth of the Middle East region, could spark a wave of similar activity in the food delivery sector. This could include further acquisitions, partnerships, and IPOs, further evolving the competitive dynamics within the industry. With its commitment to the Middle East and a track record of strong growth, Talabat is well-positioned to capitalize on the region’s potential.
The success of the IPO will hinge on several factors, including market conditions, regulatory approvals, and a successful execution of the listing process. However, the move demonstrates Delivery Hero’s confidence in the future of its Middle East business and its strategic focus on creating long-term value for its stakeholders.
