After Saturday’s failed attempt at proposing a takeover bid for Delivery Hero, Uber’s board confirmed that they had met to consider a higher offer after the German multinational received an offer valuing the company at 11.5 billion euros ($13.39B), the Financial Times reported on Sunday.

The offer

Delivery Hero confirmed that it had received an offer, of 33 euros per share, after Uber CEO Dara Khosrowshahi flew to to meet Delivery Hero’s supervisory board chair Kristin Skogen Lund in Oslo. Uber approached one of Delivery Hero’s largest shareholders with an offer ‌of ⁠38 euros per share in recent days but was rejected, the FT report added.

In the same FT report, several Delivery Hero shareholders shared that they were seeking a price above 40 euros (46 USD) per share ⁠for the whole company. There have also been suggestions that the American service DoorDash has been eyeing Delivery Hero and has made enquiries to shareholders but has not purchased any ⁠shares.

Current control

Uber acquired €270mn-worth of shares in Delivery Hero from Prosus in April, giving it a 19.5 per cent stake. The Dutch investment group was previously Delivery Hero’s largest shareholder but has been reducing its holding to comply with EU antitrust requirements linked to its takeover of Just Eat.

Meanwhile, Uber is now already the largest shareholder with a 19.5 per cent stake in the German giant, with the stake valued at 1.424 billion euros on Friday. The only other large shareholder, with a stake of 14.55 per cent is Hong Kong’s Aspex Management Ltd.

The FT reported that Uber had previously demonstrated no intent to acquire 30 per cent or more of [Delivery Hero’s] voting rights. According to German rules, any offer of a 30 per cent stake or more would trigger an obligation to make a takeover offer.

Consolidation of the food delivery market

Uber is reportedly seeking to expand its food delivery reach in Europe as well as in the MENA region, where Glovo and InstaShop hold a significant portion of the market. Uber Eats, Uber’s existing delivery platform, has struggled to expand across European markets, and began much later than its competitors’ grocery delivery services.

The worldwide food delivery market is experiencing a level of consolidation not known before last year: American giant DoorDash took over control of Deliveroo for 3.36 billion euros, and Dutch investment group Prosus acquired Just Eat in a 4.1-billion-euro takeover.

The food delivery market is one that continues to grow hugely, however, consolidation in the hands of an ever-smaller number of multinationals is increasingly impacting restaurants and smaller operators.

With fewer delivery services controlling market access, commission rates have crept steadily upward. In an inquiry undertaken by Foodondemand, restaurants reported commission fees ranging from 15 per cent to 30 per cent per order, with premium placement adding additional costs. For establishments that are often operating on razor-thin margins – often between 3 per cent and 9 per cent – the differential in these fees can mean the difference between profitability and loss.

Risks of consolidation

This is the case especially in up-and-coming markets, which are still experiencing a proliferation of operators and then a subsequent consolidation of the food delivery industry. As consolidation accelerates, industry experts warn that the global food delivery market increasingly resembles an oligopoly dominated by a small number of multinational platforms. While investors have welcomed the wave of mergers as a route to profitability after years of aggressive expansion and cash burn, restaurant owners and labour advocates argue that reduced competition risks concentrating power in the hands of delivery giants.

For restaurants, dependence on delivery apps has become difficult to avoid, particularly in urban markets where consumers increasingly expect rapid delivery as standard. This has made in-house delivery services, operated by restaurants and supermarkets, unprofitable and uncompetitive when compared with the existing platforms. Many smaller businesses say rising commission fees and advertising costs are eroding already narrow profit margins.

Whether further mergers materialise or not, the battle for dominance in the food delivery sector appears far from over, and the consolidation across the sector appears likely to continue in the years ahead.