A wonderful good afternoon, ladies and gentlemen. Welcome to the Delivery Hero Conference Call. My name is Frances, the correspondent operator. I would like to remind you that all participants will be in a listen-only mode and the conference is being recorded. The presentation will be followed by a question-and-answer session. If you would like to ask a question, you may register at any time by pressing * and 1. For Operator Assistant, please press * and 0. At this time, it is my pleasure to hand over to Christoph Bast, Head of Investor Relations. Please go ahead, sir.
Hello and welcome, everyone. Thank you very much for joining our call today. We would like to remind you that this call is being recorded and streamed live on our website. In addition, there will also be a replay of the call available later today. With me today, we have Niklas Östberg, CEO, and Emmanuel Thomassin, CFO of Delivery Hero, who will take us through all the details of the transaction and the rationale behind the investment of our Taiwan operations. After that, we look forward to answering your questions. Now, let me hand it over to you, Niklas.
Thanks, Christoph. Hey, everyone. Thanks for joining. As you have seen in our announcement, we have reached an agreement with Uber to acquire our operations in Taiwan. Let's jump straight into it in the next slide. Early today, we announced that we sold our operation in Taiwan for $950 million in an all-cash transaction to Uber. Negotiations have been tough and ongoing for several months, but we believe the transaction offers clear value for both Delivery Hero, Uber, as well as the Taiwanese food delivery ecosystem. For Delivery Hero, it offers an attractive valuation for our Taiwanese operations. It also allows us to focus our efforts on other parts of our global footprint, thus further strengthening our market-leading ecosystem and creating value for our shareholders.
The transaction values our Taiwan business at a 0.6x enterprise value to GMV, a multiple based on the last 12 months ending 2024, which is almost 3x higher than what our shares are currently trading at. The transaction is targeted to close in the first half of 2025, subject to the fulfillment of customary closing conditions and obtaining the required regulatory approval, including merger control approval. Christoph, can you please mute yourself? In addition to the investment of our Taiwan business, Uber will invest $300 million in newly issued Delivery Hero ordinary shares at EUR 33 per share, which represents a premium of roughly 30% versus yesterday's closing price. We intend to use the net proceeds from the capital increase to buy back convertible bonds and improve our capital structure.
It's a bit too early to say how we are going to deploy the proceeds from the investment since regulatory approval might take some time. However, from today's point of view, we would say it's fair to assume that the vast majority of the proceeds for the investment would be used to enhance our capital structure. Now onto the next slide. Some additional context to the transaction. We will continue to run our operations in Taiwan as business as usual. This preserves the business value and market position of our Foodpanda brand until we receive regulatory approvals to conclude the transaction. Over the last 12 months ending March 2023, we generated GMV of EUR 1.6 billion in Taiwan. This is approximately 3% of our global GMV.
Until the transaction is finalized, we will continue to consolidate our operations in Taiwan into Delivery Hero Group, so no changes for now on our operating structure or reporting structure. In regards to the share sale agreement, we anticipate finalizing Uber's investment in Delivery Hero shares within the week. This means that Uber will become a minority shareholder with slightly less than 3% of our share capital going forward. Now onto the next slide where Emmanuel will take us through the use of proceeds.
Thanks, Niklas, and good day, everyone. So we currently have nearly EUR 3.9 billion in net debt considering our current cash, also outstanding convertibles and term loans. This is the balance either of year-end 2023 after the investments of Delivery Hero shares, the upside of term loans, and repayments of convertible bonds, which include their 2024 maturity, as well as the partial repurchase of 2025 and 2026 maturities. So we will now receive a cash inflow of $300 million, obviously, for the sale of Delivery Hero shares. And we will then receive a cash inflow of $950 million for the investments of our operations in Taiwan once the transaction closes. Both figures have been converted from US dollars into euros using current FX rates in the charts for study purposes.
As Niklas already mentioned, we intend to use the net proceeds from the capital increase to buy back convertible bonds and to improve our capital structure. The net proceeds from the investments should be mainly used to strengthen our balance sheet as well. We estimate the net debt reduction up to around 30% if we were to allocate the whole cash inflow from the transaction towards paying down our debt or decide to keep the cash on the balance sheet. This would result in a pro forma net debt of EUR 2.7 billion post-closing of the transaction. As mentioned before, we are in a comfortable position to repay all of debt maturities organically over the coming years through our cash flows if so desired. This deal offers an upside to our cash flow projection shared in the previous trading update.
And we will not hesitate to engage in further portfolio rationalization or pursue additional efficiency gains in our operation. So now we look forward to taking your questions. And Operator, please go ahead.
Thank you very much. Ladies and gentlemen, we will begin with the question-and-answer session now. If you would like to ask a question, please press * and 1. If you wish to remove yourself from the question queue, you may press * and 2. Anyone who has a question may press * and 1 at this time. One moment for our first question, please. Our first question today comes from Jo Barnet-Lamb from UBS. Please go ahead with your question.
Excellent. Thank you very much for taking my question. I've got many, but I'll kick off with one. Within the release, you sort of talk about deal protections or contractual agreements to make sure that both parties are incentivized to close the deal. Can you give us some more color on what's been agreed here? Is there a break fee? How big is it? Any color on sort of the contractual language would be fantastic. I appreciate you. Probably don't want to go into detail, but anything even high-level would be very helpful. Thank you.
Thank you, Joe. Yes, I can't go into details here. But as we said in prior discussions when it comes to M&A, price and value is equally important to certainty. Or I think in many cases, we even value certainty higher than price. And in this regard, we are very happy that we came to a good conclusion with Uber to create that certainty. So I can't go into specifics, but as I said, we value certainty probably even higher than value. Yeah.
Thank you.
Thanks.
The next question comes from Marcus Diebel from J.P. Morgan. Please go ahead. Mr. Diebel, your line is open. Maybe you're on mute.
Yeah, hi, everyone. It's fine. I think you can hear me now. Yeah, just again on breakup fee, is there really nothing you can say in this context? I mean, shall we just assume that there's no clause and therefore the rights issue and Uber participating is sort of like and them having skin in the game is kind of like the real breakup fee? Or is there any contractual point? I think it would be just important to give maybe us and investors a bit more on this. And then maybe the question related to this, does it actually mean with this deal, you restored the balance sheet quite significantly? From your perspective, does it change your view, how you think about other disposals?
Again, I appreciate you can't go into specific details, but are you now more inclined to say, given where the balance sheet is as of sort of today, disposals from here are a bit less likely? Yeah? But maybe if you can follow up on Joe's question because I think it's important. Thank you.
So the investment has nothing to do with creating certainty and so on. So that is a separate part of the deal. But when I speak about certainty, I don't know that there are other aspects of it. I can, unfortunately, not go into the specifics here. But as I said, I don't know, we value certainty at least as high as value. And I think we found a very good solution together with Uber to create that certainty for us. But unfortunately, I cannot go into specifics, at least not at this point in time. In regards to other transactions, I can't really go into that. I think we always remain very rational and we always act in the interest of all shareholders.
I think we have proven that many, many times over in Delivery Hero, not only now, but in prior deals, both buying as well as being selling. So we have proven that rationality. But again, in order for a transaction to happen, there needs to be a clear value for shareholders and there needs to be high certainty of a deal to close. So under those conditions, we evaluate anything that would be additive to the shareholder and accretive to shareholders. But I cannot make any further comments on that.
Okay. Fair enough. Thank you.
Thanks.
The next question comes from Giles Thorne from Jefferies. Please go ahead.
Thank you. Apologies. I've only just joined, so my question might have been asked already, but it was on the antitrust review. There's reference in the release today around fierce competition in the market, which comes as a little bit of a surprise to a lot of us. But I suppose it depends on your market definition. So it would be useful to get some insights, Niklas, into the lines of argument that you'll be pushing for approval with the Fair Trade Commission. And then secondly, on the assumption that the previous Foodpanda Southeast Asia deal with Grab fell apart, not necessarily on valuation, but just on Grab's commitment to certain remedies or deal terms, do you think this deal could be a template to revisit that deal with Grab? Thank you.
Thanks. The discussion with the regulator will mainly be driven by Uber, so you would have to maybe ask them the line of arguments. Of course, we think there are a lot of arguments for the benefits of consumers, riders, and ecosystem. But I'll leave it up to the Uber team. Yeah, as you said, in terms of other deals, yeah, again, certainty is very important as paramount for taking any decision of us. So any other potential deals that we would consider would need to have a high certainty and clear aspects to get it done. But again, I cannot speak to specifics around any future potential transactions. Yeah. I'll have to leave it there.
Thank you. And just a follow-up on that latter one. And again, apologies. This has already been asked. But is there any possibility that proceeds will be redirected towards some of those Southeast Asian assets that you're now no longer selling?
I cannot comment on that. I'm really constantly evaluating the opportunities across the globe. At the same time, I don't know, we are rational in how we're investing. Yeah, I cannot comment on how we will invest and allocate our focus. I do think in general, I don't know, we spent a lot of focus on Taiwan. Of course, that means that we can reallocate at least our focus of effort and mindshare in other places. I think you have seen as an example of that in Korea. We have put a lot of efforts over the last few weeks, and I think the development there has been very strong. I think now we can even put more focus into areas such as Korea, but potentially also other areas of our business where in order to gain even further leadership.
We are clear leader in most geographies, and we want to remain in that position. Of course, this helps us to take one big battleground out of scope and put that energy and effort into other areas.
Understood. Thank you very much.
Thanks.
The next question comes from Joseph McNamara from Citi. Please go ahead.
Hi. Thanks for taking my question. Thanks for giving the GMV and EBITDA stats of Taiwan over the last 12 months. I was hoping you could maybe tell us a bit more about how the business has grown over the past year or two. For instance, I see back in 2021 that it was your second-largest market by revenue. And then also similarly on EBITDA, I guess how that's progressed and whether you expected kind of meaningful improvement this year in Taiwan profitability. Thank you.
All right. We can't go into country specifics here, but I think it's fair to assume that Taiwan has been growing as the rest of APAC in similar. I don't know if they had a similar pattern both leading up to during COVID, before COVID, as well as after COVID. So the market followed a similar path as we've seen in the rest of Southeast Asia. So I think that is a fair assumption. That also then means that it's growing slightly less than the group. And in terms of EBITDA, I can't really comment there. I think we have said prior to this that it's a slight positive EBITDA for the Southeast Asia, our APAC business, not including group costs, but including regional costs. I think that's also a fair assumption for Taiwan being in that range.
That slight positive excluding group cost, I think, is an assumption you can work with.
The next question comes from Jürgen Kolb from Kepler. Please go ahead.
Thank you very much. Two questions from my side. First one, understood that you cannot talk about potential additional deals, but maybe with a different angle. Are there any other regions, countries where you have a similar competitive environment as in Taiwan, where it looks like you both have been competing head-to-head from a market share perspective? Any of those similarities from a regional or market perspective helpful? Second one, just a clarification. So the fact that Uber will buy or will become a minority shareholder, that is independently from this deal if it gets approval or not, right?
So starting with the second question, yes, that's regardless of anything. So there will be a shareholder regardless. Yeah. So essentially two separate transactions. Of course, agreed at the same time, but two separate transactions. On the first one, yeah, I think in general, markets where there are two strong players generally have a lot of synergy values. We can also, in those places, be more value-add to the consumers as well as the riders and the general ecosystem when those markets consolidate. So I think there is a lot of value for companies to find ways and paths to consolidate. But yeah, in the end, any deal requires two sides of it. And as also said before, it's not only about price, but it's also about driving certainty if there are transactions. Yeah, that's all I can say.
Okay. Understood. Thanks very much.
Thanks.
The next question comes from Silvia Cuneo from Deutsche Bank. Please go ahead.
Thanks. Good afternoon, everyone. My first question is a follow-up on the antitrust process. Given that you expect closing in H1 2025, that's about a year, just wondering if you could share some thoughts about how the process typically works in Taiwan, perhaps in comparison with the U.K. or some European countries where we might be more familiar of just to think about the phases that we should expect. And then the second question is on something you mentioned during the presentation in terms of your delivery not pursuing additional efficiency gains in the operations for the time being. Does this mean anything for your plans and guidance for 2024 where you're expecting to drive efficiencies in Taiwan? Thank you.
So on the first, I don't know, obviously, Taiwan, as many other places, have a very good, smart antitrust approval system and people working there. I think we all see the value of this from the ecosystem, including riders and restaurants as well as a broader ecosystem for enabling this transaction. But yeah, I don't know. I have not so much more to add there. In terms of guidance, it doesn't change. We will also include Taiwan as part of our business also for 2024. So it'll be part of our reporting. And only then in 2025 will it be taken out when transaction is closing. I don't know. Maybe, Emmanuel, anything more you want to add?
Yeah. No, I know. I mean, you're right. I mean, we will not discontinue Taiwan because basically, we are still the owner of the country. So we continue to drive the business in good faith. And it should not have any massive impact on EBITDA for this year. We will discontinue the operations only when the closing is happening. And then, for sure, for management presentations coming up and training updates and so on and so forth, we might exclude Taiwan from the year before and from this year for illustrations or just for comparisons. But from the IFRS standpoint, as Niklas just mentioned, the operations will not be discontinued unless, I should say, and until the closing is taking place. And this has no impact on the guidance because you also specifically asked for the guidance.
It doesn't have any impact on the guidance nor on GMV revenues or EBITDA because their operation will continue. It will not be discontinued until closing.
The next question comes from Christopher Johnen from HSBC. Please go ahead.
Yes. Thanks for taking my question. A quick one. I'm just curious on the Uber investment. Has there been any sort of agreement on any standstill? Are they able to freely buy shares if they want to? Has there been anything that's been discussed here as part of the transaction? Thank you.
No, there is no standstill. And I don't know. You have to ask Uber, but I do think that they see a clear value in delivery here at the current prices. And I don't know. Of course, we welcome them as a shareholder. We know them for many years, and I respect Dara tremendously. I think he's done a phenomenal job at Uber. So we have a lot of respect for them. But in the end, I don't know. They will be shareholders as long as they want to be shareholders. I would expect they would want to be shareholders for a very long time. But again, you will have to ask them. Yeah, there is some short lockup period, but I wouldn't pay too much attention to that. I would assume they see a lot of value in the business over the long haul.
Perfect. Thank you. Thanks a lot.
The next question comes from Annick Maas from Bernstein. Please go ahead.
Hi there. Shall we assume that as part of this deal, Uber also looked at your other markets and they decided they were not interested in any of these markets? Or to the contrary, shall we assume that there's more to come and the shareholding is indicative of them wanting to look at other markets? Thank you.
I wouldn't assume anything there. I would just assume that we saw value in doing something in Taiwan. They had a tremendous competitor. I think we have and I don't know. We see that there's a lot of value in that market. And I think in general, I prefer smaller deals than increasing complexity by doing anything else. I think in general, we would always do one deal where it's possible, especially since this is a complex transaction where for us, it's very important to have the certainty around it. And that requires also some creativity and some good work. So from that point, I don't know. We only discussed Taiwan. And I would not assume anything either that it would be more nor that there will never be anything. Taiwan was the only discussion point at this point.
We have a follow-up question from Mr. Barnet-Lamb. Please go ahead.
Actually, I have two, if that's all right. So firstly, I mean, we have had a couple of questions around this, but you explained how it's effectively two transactions, the Taiwan sale and the minority investment. With the equity issuance to Uber, can you talk through why this was done from your perspective? You've been pretty ardently against dilutive equity issuance in sort of previous calls. So sort of why do that now? Is it fair to assume that that was required by Uber? And related to that, how did you agree the premium versus yesterday's close? And then the other question, I think you mentioned something around cost savings or this not impacting efficiency savings across the group. Could you just repeat what you said relating to cost savings?
More broadly, on the back of this, does this impact your view on overheads across the group, your tech hubs? If there's any color you can give us around any impact it might have there. And then I promise beyond that, I am done. Thank you.
So yeah, yes, I agree. I do not like to dilute at this level. Everyone knows that. But again, it was unnecessary to get the deal done. It was a small amount. So therefore, the dilution is small. So therefore, we were also okay with this. And yeah, I think any further comment on that, I think Uber team would be best to approach. Then in terms of cost, look, Taiwan is roughly 3% of our business. So it will not have material impact on our cost basis once the transaction is closed. Now, it will still take 12-18 months until transaction is closed. So therefore, we should not expect anything material there over the next 12-18 months. And even after that, it's still not material to our business in size. But of course, we continuously work on efficiencies regardless of this transaction or not.
I think we have been doing a pretty good job over the last couple of years and in particular, the last six months. I think there has been some great actions to drive further efficiencies across the group. And we are continuing on that path. But I wouldn't see this as material. Of course, it means one less market, one less focus point. And of course, Taiwan has been a big focus point given that there is one out of the few markets where we have been in strong competition. While majority, I think 90% of our business is in leadership, this one has been in kind of equal state. I should also add there are also other competitors in Taiwan. So it's not only Uber and us. There are plenty of other competitors there as well. Yeah. So we will have to yeah. That's it.
Wonderful. Thank you.
Thank you so much.
We have another follow-up from Mr. McNamara. Please go ahead.
Brilliant. Thank you. I had a quick one on the rationale for the potential use of proceeds to buy back convertibles. I guess firstly, is there call protection built into your recently refinanced term loans? And is that the kind of reason, I guess, why not considering those? And when could you remind us, does that run out? And then equally, you've previously bought back converts chronologically. I guess, could you talk about whether you'd consider buying back the longer-dated converts with the higher discounts as well? Thank you.
Yeah. So for the first part, the EUR 300 million, it will be focused on the convertibles. We are looking through the full spectrum of convertibles and where we see the best price and matching also our own profiles. So we will look at across the range. For the larger amount that comes in at closing, we will also explore where we have the best return if there is any convertibles, if there is potential to buy back the term loan, or if there are other, even more better return options at that point. But I think, as Emmanuel said, or maybe it was me saying even, from where we stand right now, the most likely scenarios that we buy back convert or potentially a term loan.
Okay. Understood. So the larger amount, the term loan is one to potentially consider as well, just to be clear.
It will also be considered, yes.
Fabulous. Thank you.
Thank you.
A follow-up from Mr. Diebel. Please go ahead.
Yeah. Hi everyone. Maybe a question for Emmanuel. Emmanuel, is there a tax effect? Is there a withholding tax in Taiwan? Or should we just put $950 million into our cash flow for 2025? Thank you.
Hello. So we don't expect any withholding effects from this transaction at this stage. There are withholding tax in Taiwan, but we also solved it in the past. So we don't expect any negative impact from withholding tax for this transaction.
Okay. Thanks.
Sure.
Ladies and gentlemen, that was our last question today. I will hand back to Niklas for any closing comments.
Thank you very much, everyone. A special thanks also to the Taiwanese team as well as the foodpanda. The valuation of operations is a testament to the hard work from all of you over the past eight years. In order to continue to build a world-leading service, we have come to the conclusion that we need to focus our resources on other parts of our global footprint where we feel we can have the largest impact for customers, vendors, and riders. So again, I want to thank everyone for the very hard work. Thank you everyone for listening in and for your continued support. Thank you, everyone.
Thanks. Have a good day.
Ladies and gentlemen, the conference is now concluded, and you may disconnect. Thank you very much for joining and have a pleasant day. Goodbye.