Thursday, October 6

What does it mean for Delivery Hero to take control of Glovo ?: The keys to the ‘New Year’s Eve operation’

  • The firm founded by Óscar Pierre, who maintains the management after the sale, gains in international projection and financial muscle to continue growing and service old debts

A few minutes before the bells that would start 2022, one of the most important business operations in Spain in 2021 was closed: the European giant Delivery Hero took control of Glovo. One of the leaders of the home delivery in Europe now controls the Spanish champion, in a ‘New Year’s Eve operation’ that obeys different keys.

On the one hand, Glovo increases its relationship with a ‘big fish’ worldwide and reinforces a scenario in which more and more a few giants distribute the distribution at home. On the other hand, it thus obtains a new and more direct injection of capital, of about 780 million euros, to maintain the rhythm of competition against the aggressive bets of its competitors. And, on the other hand, it is endowed with resources to pay for the debts that it continues to drag with the Social Security given the old legal disputes for their use of false self-employed workers and those who may come from new, in view of the ongoing Inspection investigations in cities such as Barcelona or Madrid. In addition to the millionaire bonus that Glovo’s management team will take for the sale.

Delivery Hero’s interest in gaining control of Glovo goes back a long way and rumors about an imminent purchase have been happening in recent years. Although Delivery Hero was already part of Glovo’s capital (it controlled 44% of the shareholding), after the operation and at the expense of the approval of European regulators, it now controls the firm and becomes the main investor, with 79, 4% stake in this firm, valued after the operation at 2,300 million euros.

Why have now the founders Óscar Pierre and Sacha Michaud (who retain the Glovo management after the operation) have decided to give the go-ahead? “I am delighted to have found a partner who shares our ambition and culture and who will continue to support us in this adventure,” said Oscar Pierre in the New Year’s Eve statement publicizing the operation.

World competition

Sources familiar with the sector suggest that one of the key elements of the operation is “will continue to support us”. And for two reasons. On the one hand, although Glovo is a ‘big fish’ of the ‘delivery’ in a small pond like Spain, its weight at the international level is far from the big sharks. Like Doordash, a benchmark in the United States, where it controls almost 6 out of 10 orders and a few months ago it bought the Finnish Walt for 7,000 million euros. Or Just Eat, whose worldwide market volume is 10 times higher than Glovo’s and which recently bought the American GrubHub for 6.5 billion euros. Or Uber Eats, the delivery division of the technology giant Uber that last year bought the American Posmates for 2.34 billion euros.

“To continue growing, I needed the protection of someone like that,” say those same sources. From Delivery Hero, in the presentation prepared to explain the operation to its investors, it highlights the complementarity of its areas of influence with those of Glovo as one of the star values ​​to maintain its expansionary strategy worldwide.

Financial muscle

“The platforms are betting on competing through exclusive contracts with restaurants. And for that they need financial muscle,” says UPF professor Juan José Ganuza. “The pressure of very aggressive firms such as Uber Eats, which has a competitive advantage due to its synergies with other means of transport, forces them to capitalize to continue competing,” he adds.

The periodic capital injections to maintain that financial muscle in a sector on the rise and with strong competitors has been a constant. Until now Glovo has opted for financing rounds, bringing in new investors. The last one was closed this past April for the value of 450 million euros, with the help of the Lugard Road Capital and Luxor Capital Group funds.

Debts with Social Security

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Glovo’s history in Spain is marked, among others, by labor unrest. Your use of fake freelancers It has been censored by the Labor Inspectorate and the courts, with multimillion-dollar consequences for the coffers of the yellow backpack company. According to union sources, the old amounts could exceed the 35 million euros. And, despite the new ‘rider law’, the firm has decided to keep a large part of its fleet with self-employed workers. A practice on which the Inspection is already investigating in Barcelona and Madrid and from which new millionaire fines could be derived.

“The problem is not what they have paid so far, but what they may have to pay from now on,” says a manager in the sector. The ‘living debt’ – that which Glovo would be generating if the Inspection and the courts certify that the current distribution model with the self-employed continues to be illicit – may result in amounts much higher than those paid so far by Glovo. Well, the home delivery sector has been experiencing intense growth for years and currently the platforms operate with many more ‘riders’ than when the first inspections began.

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