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Startup Deliveroo rules out noncore play amid Amazon, Uber takeover speculation

U.K. food delivery startup Roofoods Ltd., better known as Deliveroo, ruled out expansion into noncore strategic markets, amid speculation of takeover interest from U.S. ride-hailing business Uber Technologies Inc. and online retail giant Inc.

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Source: Deliveroo

Uber was reported to be in early-stage discussions with the company regarding a potential sale, while Amazon is also said to have made two prior approaches for the company. A source close to the company, however, recently told S&P Global Market Intelligence that the most recent sale rumors are baseless.

"Our very clear five-year [to] ten-year goals are to become the definitive food company, in the same way that Spotify Technology SA is the [go-to] music company," Deliveroo's CEO and co-founder, William Shu, said Oct. 9 at the WIRED Smarter 2018, a one-day conference in London designed for executives across sectors.

The London-headquartered company, whose investors include Index Ventures and Fidelity Management & Research Co., was valued at $2 billion in its latest funding round, worth $385 million (£285 million). Based on its most recent financial results for the year ended Dec. 31, 2017, Deliveroo reported a 116% year-over-year increase in revenue to £277.1 million.

The company warned in its filings, however, that regulatory changes could cause uncertainty for the business.

Internet-based, on-demand companies operating in the sharing economy, also referred to as the gig economy, have come under legal scrutiny in the U.K. over the pay and flexible working conditions of contractors, who make up the bulk of the company's workforce.

The issue of whether those working at businesses like Deliveroo, which has 15,000 riders across 100 U.K. towns and cities, should be classified as self-employed — thereby disabling rights such as healthcare and paid holiday leave — remains a contentious issue. A government-commissioned report published last year called for legislators to adopt additional protections for gig economy workers due to the "increasing casualization of the labor market."

Flexible working and the ability to "log in and out whenever you want" is key to the company's business model, Deliveroo's Shu said, adding that the average Deliveroo rider works 12 hours each week. Having said that, he has sympathy for workers seeking benefits and accepted wider criticism of the business as a part of the sharing economy's growing pains, Shu said.

"Traditionally, there's been this disconnect between flexibility and security. My view on this is pretty straightforward ... if you work with Deliveroo, say, 40-50 hours a week, you should have rights that are much more like an employee than if you log in twice a month," he said.

Shu added that the company would continue to seek guidance from the government on that matter. "We're working with governments to try to figure that out. We don't want the courts to decide everything … we want to be part of that discussion," he concluded.