Amazon Expected to Take 16% Stake in Deliveroo

UTC by Steve Muchoki · 2 min read
Amazon Expected to Take 16% Stake in Deliveroo
Photo: Deliveroo

The Competition and Market Authority (CMA) has given Amazon a green light to take a 16% stake in Deliveroo for the second time. AMZN shares have added 0.64% in the pre-market to trade around $2751.77

Through a press release that was published on June 24, 2020, on the official UK government webpage, the Competition and Market Authority (CMA) provisionally cleared the intention of Inc (NASDAQ: AMZN) to take a 16% stake in Deliveroo. This time around, CMA cited that the deal is not expected to do any considerable damage to the competition in either restaurant delivery or the online convenience grocery delivery.

“This decision reflects the 16% shareholding that Amazon is acquiring at the present time. Were Amazon to acquire a greater level of control over Deliveroo, in particular by making a full acquisition of the company, this could trigger a further investigation by the CMA,” the statement read.

According to the report, the Competition and Market Authority reviewed a lot of evidence that included the large volumes of internal documents from the American giant e-commerce company and also from the Deliveroo company. The CMA also did a survey of over 3,000 consumers besides the extensive submissions from interested third parties. 

Amazon Investment in Deliveroo

The bigger picture in the latest investigation was based on the impact of the Amazon shareholding in the company and how it could affect the market at large.

Initially, during the provisional report published on April 17, 2020, the CMA said that the imminent exit of Deliveroo in the UK market would be much worse for competition than allowing the Amazon investment to proceed. As a result, Amazon was eventually cleared to boost Deliveroo and see it through the coronavirus pandemic, which had severely impacted its business operations due to the lockdowns.

In the latest report that was phase 2 of the investigation, the CMA was assessing the impact of the merger between the two online grocery delivery companies putting in perspective the ongoing coronavirus pandemic and the future possibilities.

“The impact of the coronavirus pandemic, while initially extremely challenging, has not been as severe for Deliveroo as was anticipated when we reached our initial provisional findings in April,” said Stuart McIntosh, the inquiry chair. “The updated evidence no longer shows that Deliveroo would exit the market in the absence of this transaction. This has required us to re-evaluate our initial provisional findings,” he added.

Having closed with a drop of 1.09% yesterday, in the pre-market Amazon shares are up 0.64% to trade around $2,752.77. Amazon stock is expected to remain being one of the COVID-19 winners and presumably post-COVID.

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Steve Muchoki
Author Steve Muchoki

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