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Delivery Hero

Delivery Hero Joins The $1B Valuation Club As It Gobbles Rival Pizza.de

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On the heels of Rocket Internet’s food delivery service FoodPanda taking another $60 million in funding, its German rival Delivery Hero is also stepping up its game in a consolidation play. The company today is announcing that it has acquired Pizza.de, another longstanding competitor also based in Germany.

The financial terms of the deal were not disclosed but we understand from a source that it is an all-cash deal, with no shares exchanged and that post-acquisition, the total valuation of Delivery Hero is now over $1 billion.

Update: A VC advisory group based in Berlin, Cooperativa.vc, noted in a Tweet that the acquisition is actually worth €400 million ($535 million), which it has contacted us to note they made a typo and it is actually $400 million. A German publication, Express.de, notes a price in a similar range: €290 million, or $387 million. Delivery Hero would not confirm the price when asked again.

Östberg calls the acquisition of Pizza.de “the largest news in the history of Delivery Hero,” and you can see why. While Delivery Hero has raised $306.7 million since opening for business in 2010 — including over $170 million this year alone — Pizza.de gives Delivery Hero a big boost in scale in its core market. And in the world of e-commerce and logistics-based services, certainly time is of the essence, but scale is, too.

As a point of comparison on valuation, UK-based Just-Eat, another European competitor in the space that went public earlier this year, is currently valued at $2.45 billion (£1.47 billion). U.S.-based Grubhub, meanwhile, is valued at $3.56 billion. Delivery Hero, like FoodPanda, remains in private hands, but that may change in the next year, or it may not: “We still aim to be IPO ready in the course of next year,” Östberg tells me, “with IPO as an option to choose from.”

While we don’t know FoodPanda’s numbers, it has the mighty power of Rocket Internet behind it. In Berlin’s so-called “startup factory”, the Samwer brothers, founders of Rocket Internet, have built up a global empire of e-commerce businesses (scale again!), and is inching into an IPO with a valuation of around $4.4 billion.

Beyond these existing food delivery players, there is the prospect of yet more entrants. Amazon, we have heard from reliable sources, is among those interested in the space, to dovetail with their other efforts to push into local commerce (our source even cited Delivery Hero among those that were a point of comparison for the Seattle giant). And Square recently acquired Caviar.

The fact that these companies are larger than Delivery Hero both in terms of valuation and organization does not seem to deter the company for now.

“Generally we feel quite comfortable since we have investors backing our company that have billions of dollars at their disposal,” Östberg says. Delivery Hero’s investors include Insight Venture Partners, Luxor Capital Group, Kite Ventures, Team Europe, ru-Net, Tengelmann Ventures, Point Nine Capital and Phenomen Ventures. “Due to our focus on delivering the best takeaway, we feel confident that we will always be able to provide a better service than general e-commerce companies. For that reason not worried as long as we continue to stay innovative.”

Today Delivery Hero’s food ordering services cover some 75,000 restaurants across 23 countries, with half of its 800 staff based in Berlin.

Delivery Hero’s German brand, Lieferheld, and Pizza.de will continue to operate as separate brands, the company says. Part of the reason is demographics: Pizza.de is popular with students in particular, who like to track their deliveries in real-time as a way of procrastinating from doing their work; no need to mess with a good formula.

“Customers of both German brands will benefit from improved services driven by the collective expertise and innovative capacity of both companies,” the company says in a statement. “Restaurants that cooperate with both brands can now be serviced by a single point of contact.” With Germany sewn up, this will also give the company the ability to focus more on Asia and Latin America.

There is a bit of backstory worth noting here, too. Pizza.de actually went after Lieferheld in the courts alleging that the latter company had stolen database information from Pizza.de. The claim was that Lieferheld, starting in the business later than Pizza.de, had lifted menu and account names from Pizza.de to build up its business. The two knocked heads, and apparently settled, in two different court cases.

Image: Flickr