Publicly traded food delivery company Delivery Hero SE has raised 1.25 billion euros, or about $1.5 billion, through a sale of convertible bonds intended to support growth initiatives.

The sale was reported by Bloomberg today. Delivery Hero is said to have sold 750 million euros’ worth of bonds due in 2026 and an additional 500 million euro batch set to mature in 2029. The company will use the proceeds for general corporate purposes, as well as to potentially make investments.

Berlin-based Delivery Hero is one of the world’s largest food delivery providers, with a market capitalization of about 32 billion euros, or $38 billion. The company operates in more than 50 countries. Like many of the other major players in the food delivery market, Delivery Hero is growing its revenues rapidly but operating at a loss. 

Delivery Hero’s apps processed 1.4 billion orders in the first half of its 2021 fiscal year, a hefty 83% increase compared with the same time 12 months earlier. The increased demand from consumers more than doubled the company’s revenue to 2.9 billion euros, the equivalent of $3.45 billion. The company’s fastest-growing business, its Integrated Verticals group, saw an even bigger sales jump: The unit nearly quadrupled revenue year-over-year to approximately 449 million euros.

The Integrated Verticals group includes Delivery Hero’s so-called quick commerce operations. Quick commerce is the term for an emerging business model whereby food delivery companies ferry goods such as groceries to consumers within an hour of an order being placed. In some cases, orders take less than 15 minutes to arrive.

Delivery Hero and its competitors in the quick commerce segment provide such rapid deliveries by setting up a large number of small warehouses throughout a city. The warehouses, which Delivery Hero calls Dmarts, are located close enough to consumers that orders take only a few minutes to process. The company is rapidly increasing the number of Dmarts it operates globally and the $1.5 billion raised from its new convertible note sale could help further accelerate the effort.

It’s also notable that Delivery Hero said some of the funds could be used to make investments. Last month, the company invested an estimated $400 million to buy a 5.09% stake in publicly traded rival Deliveroo PLC. Delivery Hero earlier bought stakes in several other competing food delivery companies. The proceeds from the convertible note sale could help Delivery Hero to make more investments, including potentially acquisitions of smaller rivals.

Another way the company can put the capital to use is by growing its DX Ventures startup fund. DX Ventures launched earlier this year with 50 million euros in initial capital for backing early-stage startups across areas such as on-demand services, food technology, sustainable innovation, artificial intelligence, financial technology and logistics.

Photo: Delivery Hero