DoorDash (NASDAQ: DASH), a U.S. food delivery giant, has expressed acquisition interest in Deliveroo, a U.K.-based food delivery rival (LON: ROO). DoorDash offered 180 pence ($2.40) per share, valuing Deliveroo at £2.7bn ($3.6bn), the U.K.-based company announced.

DoorDash’s offer valued Deliveroo at a roughly 23% premium to its closing share price on Friday, April 25, the last trading day before the preliminary offer was announced. Deliveroo’s shares soared 16% on Monday in response to the offer.

However, the offer values Deliveroo at considerably less than its £5.8bn ($7.8bn) peak valuation in 2021. At that point, Deliveroo rode high on surging food delivery demand during the COVID-19 pandemic. However, demand slowed afterwards, and Deliveroo faced increasing competition. Global economic headwinds also contributed to a reduction in Deliveroo’s market value.

• DoorDash’s offer is its latest bold push into foreign markets. In 2021, it struck an $8bn all-stock deal to acquire Wolt, a Finnish food delivery app. A lower share price meant the deal ultimately valued Wolt at around $2.7bn when it closed.

• Acquiring Deliveroo will give DoorDash a firmer footing in the U.K., where it already operates. It can also leverage Deliveroo’s infrastructure to diversify further into grocery and non-food services, a strategy DoorDash has begun amid tough competition in the food delivery market.

Deliveroo responded well to the preliminary offer, suspending a share buyback program and engaging in discussions with DoorDash’s board. DoorDash has until May 23rd to make a formal offer.

If DoorDash makes a formal buyout proposal and agrees on the financial terms, Deliveroo said “it would be minded to recommend such an offer” to its shareholders.

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