Talabat set for share market entry with IPO plans
Germany-based parent firm Delivery Hero confirms plans for public listing
Dubai: Talabat will no longer be just a food delivery services app for those Dubai residents who are looking to invest in the all-too-familiar brand.
This is because its parent firm, Delivery Hero SE, revealed on Thursday that it is planning to list the lucrative unit on the Dubai stock exchange (DFM) by the fourth quarter of 2024.
“A listing may be pursued through a secondary sale of shares by Delivery Hero which would retain the majority interest in the local listing entity after an IPO,” the German food delivery giant said in a statement on Thursday.
The initial public offering of its fastest-growing Middle Eastern subsidiary is pending market conditions and regulatory approvals, it added.
Regardless, the listing plans were gladly received by investors as Delivery Hero's shares soared as much as 9 per cent higher in Frankfurt, more so because the shares had plunged around 85 per cent from their January 2021 highs as investors shunned food delivery stocks after a pandemic frenzy.
"We think it's a good time for us to be having regional investors participate in this business," Delivery Hero's interim finance chief Marie-Anne Popp told Reuters, without providing details on how the company intends to use proceeds from the IPO.
What analysts expect
RBC Capital Markets analysts value Delivery Hero’s Middle East and North Africa business at 5 billion euros ($5.5 billion). That implies a valuation of 1.3 times enterprise value-to-sales, they wrote in a note.
From the parent company's standpoint, analysts at Barclays are evaluating that cash from the IPO can be used to reduce its debt, which is estimated at 4 billion euros ($4.4 billion).
"We see news of the IPO of Talabat as being the main driver of a positive response," Jefferies analysts said in a note. If the IPO is successful, it would help to improve Delivery Hero's balance sheet after the sale of its Asian subsidiary foodpanda, they said, adding it would also shine a light on a quality asset that is now somewhat lost in the group's corporate structure.
While Deutsche Bank AG analysts said the listing could help Delivery Hero’s valuation, and should be received positively, those at Bernstein questioned the timing. Bloomberg Intelligence noted a cash flow risk.
“Delivery Hero’s planned IPO of its Middle Eastern business would restrict access to the cash flow from its most profitable business unit needed to fight off intensified competition in South Korea,” Bloomberg Intelligence analysts Tatiana Lisitsina and Diana Gomes wrote.
IPO boom post lull
While most analysts agree that the timing of such an IPO can be considered appropriate considering that it would fuel the stock market boom currently taking place in the region, the news comes as Gulf IPOs have just picked up after a summer lull.
Oil services provider NMDC Group on Wednesday announced it’s planning an $877 million IPO for its energy unit, putting it on track to be the UAE’ biggest listing of the year. Earlier this week, Saudi Arabia-based perfume maker Al Majed for Oud Co. received more orders for its IPO than shares available in just a few hours after books opened.
While Talabat hope to benefit from a rush of offerings in the Gulf with its entry into DFM, the offering will also further open up the retail and F&B services sector on the index. Spinneys, the grocer, is there, and so are Dubai Refreshments (the Pepsi Cola bottler) and Emirates Reem Investments Co. (which owns Jeema bottled water brand, among other F&B brands).
On ADX, there is Americana Restaurants, the biggest name in the Middle East in its space and franchisee for Pizza Hut and more. Another F&B focused listed company is Agthia.
As for talabat, it has built a significant share in the food delivery - as well as quick-commerce - services in the UAE. This instant brand recall is what it will try and leverage with investors when the IPO run comes calling.
A year later, Delivery Hero bought Talabat in 2016 as part of a wider deal with Rocket. Last year, Talabat's gross merchandise value (GMV), a metric for delivery firms measuring the total value of all goods sold, hit 5 billion euros. Talabat serves customers across the Middle East region in countries such as Bahrain, Egypt, Iraq, Jordan, Kuwait, Oman, Qatar, Saudi Arabia and the UAE.