Delivery Hero's stock drops after warning of possible hefty EU antitrust fine

By Barbara Kollmeyer

Shares of Delivery Hero SE slid on Monday after the delivery platform warned that the European Commission could slap it with a "significant fine" over antitrust violations.

The German company said the penalty "for alleged anti-competitive agreement to share national markets, exchanges of commercial sensitive information and no-poach agreements" could ultimately exceed EUR400 million ($433 million), in a statement released Sunday on its website.

Delivery Hero said its board has decided to boost a corresponding provision of EUR186 million that it announced in its 2023 annual report, following surprise EU inspections in July 2022 and November 2023.

"The intent to increase the provision is based on recent informal engagement with the European Commission and subsequent detailed analysis," the company said. "Delivery Hero intends to fully cooperate with the European Commission as it did during the unannounced inspections in July 2022 and November 2023."

Shares of the group (XE:DHER) were down 4%, moving off a 10% fall earlier Monday. Shares are down 19% so far for 2024.

The fine is probably linked to Delivery Hero's Balkans business sale to Glovo in May 2021, predating its eventual acquisition of that company, said a team of Jefferies analysts led by Giles Thorne, in a note to clients.

"More to the point, it's another materially negative regulatory development emanating from the latter acquisition (the other being the ongoing fines levied against Glovo in Spain for rider misclassification)," said the Jefferies analysts.

They say the biggest challenge for investors is not the materiality of the fine, around 6.5% of its market cap, nor in Delivery Hero's ability to pay it - proforma liquidity for the first quarter of this year was EUR1.8 billion - but "the pattern it creates."

Morgan Stanley analysts in May cut Delivery Hero to an equal-weight stance on the view any short-term drivers to the price had played out. The downgrade pressured the stock that had been rising since the start of the year.

"The news that Delivery Hero will need to raise an existing provision by a significant amount presents downside risk to our near term estimates, dependent on timing of the potential payment," according to the led by Luke Holbrook, which said its "free cash flow trajectory could be dampened in the near term" from competition, fines or other factors.

The Morgan Stanley analysts noted that the company ended 2023 with around EUR609 million in provisions, of which EUR467 million were related to legal risks, EUR81 million for personnel, EUR50 million for miscellaneous and EUR12 million for restoration obligations.

-Barbara Kollmeyer

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07-08-24 1003ET

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