Uber bid for Delivery Hero would be an odd route to superapp status

{"text":[[{"start":5.5,"text":"It isn’t hard to see why Uber wants to be “one app for everything.” Piling everything from hotels and cars to shopping and finance on to a single “super app” is tantamount to a giant cross-selling opportunity, and a rich seam of customer behavioural data. But buying Delivery Hero, the food delivery business that Uber has been circling, would be a complicated and expensive way to get closer to boss Dara Khosrowshahi’s dream. "}],[{"start":32.9,"text":"One problem is that the German group, which biked almost €50bn worth of meals last year in around 65 countries under brands such as Glovo and Foodora, has already markedly risen in price. As one of the last sizeable assets left in a sector that has been consolidating — with Deliveroo acquired by DoorDash and Just Eat Takeaway by Prosus — bid talk has swirled and its shares have roughly doubled over the past month, to give it an enterprise value of €14.2bn. "}],[{"start":null,"text":"

"}],[{"start":63.75,"text":"That makes it hard for Uber to get anything like value for money. Delivery Hero’s taxed operating profit this year, a proxy for the free cash flow it might generate after making investments in its business, is only about 2.4 per cent of its enterprise value. To get a reasonable return of, say, 10 per cent on an acquisition at these prices, Uber would need to believe it could roughly quadruple Delivery Hero’s operating profit to €2bn. "}],[{"start":91.2,"text":"To be fair, there are ways Uber could juice those numbers up. One would simply be to wait: Delivery Hero is growing, and is forecast to reach €1bn of operating profit by 2028 on S&P Capital IQ numbers. Another is to take out a chunk of its general and administrative expenses: personnel costs last year were around €1.9bn excluding delivery, reckon Bernstein analysts. If Uber managed to cut a quarter of those, it would get closer to its target. "}],[{"start":120.15,"text":"Khosrowshahi could also sell some of Delivery Hero’s country operations — and might have to in order to get antitrust approval. In Europe, Delivery Hero is lossmaking and Uber already operates in many countries under its own Uber Eats brand. Peddling some of its target’s businesses at a reasonable price might further improve the economics of a transaction. "}],[{"start":141.20000000000002,"text":"Beyond that, the hope must be that the two groups combined would grow faster. This is where superapp economics, in theory, kick in. Customers who come for the rides stay for the fries. And if all goes well, a much-improved Delivery Hero then generates lots of extra cash for Uber to plough into its business. "}],[{"start":161.20000000000002,"text":"Still, the whole endeavour looks astonishingly laborious. Should Uber continue to pursue its quarry at increasingly high prices, it would start to look less like the hunter and more like the hunted. After all, its existing ride-hailing business faces a threat from self-driving cabs, which could over time outcompete its human drivers. Being willing to spend a lot of time and money to bulk up its less-exposed activities, then, might be a sign of weakness rather than strength. "}],[{"start":198.35000000000002,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1779939604_9330.mp3"}