Delivery Hero acquires 100% of HungerStation

After years of waiting, Delivery Hero has finally acquired the 37 percent non-controlling interest in HungerStation, bringing its ownership in the Saudi food delivery company to 100 percent. The Berlin-headquartered firm paid $297 million for the deal, considering it a highly attractive price. And I completely agree with them. I’ll talk about this in a minute but first, let’s try to put this deal in context.

(Delivery Hero has not shared any details about the structure of the deal but I’d like to assume that it’s all cash).

This gives HungerStation a valuation of about $803 million, making it the largest Saudi exit and one of the biggest in the Middle East & North Africa. But that’s not the most interesting part. What makes this deal a complete outlier is the fact that the entire 37 percent stake that Delivery Hero has acquired was owned by one individual - the company’s founder, Ebrahim Al-Jassim.

With the deal, Ebrahim has become $297 million richer, making this the biggest exit for a MENA-based founder.

(Careem’s founders - Mudassir Sheikha and Magnus Olsson had a low double-digit stake in the company at the time of its Series E. Careem went on to raise at least one more financing round after that which would’ve diluted their stake further).

Let’s talk multiples now.

HungerStation’s revenue as I have previously covered in detail here, grew 36 percent YoY to $644.5 million in 2022. This means a 1.25 multiple for annual revenue (2022). Delivery Hero, at the time of writing, has a market cap of €10.86 billion and they reported a revenue of €8.58 billion in 2022 so they’re trading at about 1.27 (multiple).

But Delivery Hero at the group level hasn’t been able to turn a profit. HungerStation on the other hand has been profitable for over four years. The Saudi company generated a net profit of close to $50 million in 2022.

I don’t think this is the case of a forward purchase agreement but it cannot be ruled out.

Delivery Hero acquired InstaShop for a total of $360 million ($270 million upfront and $90 million in potential earnouts). At the time of the acquisition, InstaShop had an annualized Gross Merchandise Volume (GMV) of $300 million, which translates to a generous 1.2 multiple on its GMV. But yes, it was obviously a different kind of company and was growing at over 300 percent year-over-year at the time.

Another way to look at the deal is to compare HungerStation and its local rival Jahez which went public in early 2022. Jahez reported annual revenue of $427 million in 2022 - after growing 38 percent year-over-year. It currently has a market cap of about $1.75 billion. So Jahez is trading at a 4.1 multiple of annual revenue.

It is a fair comparison also because the two companies have experienced similar growth in 2022.

So this is an excellent deal for Delivery Hero. But at the same time, it is also a great outcome for Ebrahim Al-Jassim, who started HungerStation from Dammam as one of the first food ordering platforms in Saudi in 2012 and grew it into the largest player in the space before selling the majority stake to Foodpanda in 2016, which was a Rocket Internet company at the time. HungerStation became a part of Delivery Hero’s portfolio when it acquired Foodpanda four months later.

It is also important to note that, even without a forward purchase agreement, Ebrahim, being the minority shareholder, would not have been able to sell the stake to anyone other than Delivery Hero.

I’ll cover more of this in one of the future issues for paid subscribers of Termsheet.

See you soon,
Zubair