HelloFresh: A Potential Feast for Food Delivery Buyouts Amidst Short-Term Setbacks

HelloFresh: A Potential Feast for Food Delivery Buyouts Amidst Short-Term Setbacks

In a recent turn of events, HelloFresh (HFGG.DE), the 2.7 billion euro company renowned for delivering prepared ingredients and recipes to consumers, witnessed a 24% drop in its shares on Thursday. The setback followed the adjustment of its 2023 guidance for revenue growth, scaling down expectations from 2%-8% to 2%-5%. The primary contributors to this adjustment were water supply issues at one of its meal-prep sites and a slowdown in new customer acquisition in the United States.

CEO Dominik Richter remains optimistic, attributing these challenges to one-off incidents. Despite the revised guidance, HelloFresh maintains its profitability and growth trajectory. Even with the lowered projections, the company’s valuation, including debt, stands at 0.4 times sales—a figure trailing behind its lossmaking peers such as Just Eat Takeaway (TKWY.AS) and Delivery Hero (DHER.DE).

HelloFresh’s current valuation might position it as an enticing prospect for potential buyouts. Consider this scenario: if a buyout group were to offer a 30% premium to the company’s market value, implying an enterprise value of 3.6 billion euros, the investment could prove lucrative. Assuming HelloFresh achieves a 5% annual growth in its top line and modestly increases its margin to 8%, the estimated EBITDA could reach 800 million euros by 2028.

Intriguingly, applying an 8.5 times multiple for an exit valuation in 2028 would value the group at 6.9 billion euros, resulting in an internal rate of return of around 20% for the acquirer. These calculations, factoring in borrowing of 3 times EBITDA, paint a compelling picture for potential investors eyeing HelloFresh as an attractive investment in the food delivery sector.

As HelloFresh navigates short-term challenges, it presents an intriguing opportunity for buyout groups willing to look beyond immediate setbacks. CEO Dominik Richter’s confidence in the company’s resilience positions HelloFresh as a potential guinea pig for strategic acquisitions in the evolving landscape of food delivery.

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