‘The bar is very high’: Why Grab left a Foodpanda acquisition on the table

Photo credit: Grab

In its latest earnings call – coming after it reported its first net profitable quarter – Grab discussed the reason why it is not acquiring Germany-based Delivery Hero’s Foodpanda business, saying that the price would need to be very low for the deal to make sense.

This is because Grab is confident in their current strategy and doesn’t see a pressing need to acquire more assets.

“As we were indicating in our comments, in food deliveries we are more than double the size now of the next largest competitor in Southeast Asia,” Grab COO Alex Hungate said during the call when pressed on why the company was not interested in the Foodpanda acquisition.

While the exec did not specifically name its closest competitor, he most likely referred to Indonesia’s GoTo Group.

Hungate added that Grab achieved its market lead in food delivery by efficiently managing its operations at a large scale, which has led to lower costs and better service for customers.

“And therefore the bar for any inorganic use of shareholder funds has to be very high in comparison with that. And so in the end, any asset that we would acquire would have to be available at a very attractive price to cross that bar,” he said.

In September last year, Delivery Hero was reportedly considering selling part of its Southeast Asian business for US$1.1 billion as part of its efforts to achieve profitability.

The German firm has not disclosed the parties it was talking with, but business outlet Wirtschaftswoche named Grab as a prospective buyer.

Recently, Delivery Hero CEO Niklas Östberg confirmed that discussions about the sale fell through.

The company reported 10.5 billion euros (US$11.4 billion) in total segment revenues and 253.3 million euros (US$274.2 million) in positive adjusted EBITDA in FY 2023.

Meanwhile, Grab turned a loss of US$391 million in Q4 2022 into a profit of US$11 million in Q4 2023.

For the full year, “we generated over US$11 billion of earnings for our driver and merchant partners, which is an all-time high,” said CEO Anthony Tan during the call.

The company’s board recently approved an up to US$500 million share repurchase plan for its class A ordinary shares, which could signal the company’s confidence in its stock price rising.