One of Delivery Hero's largest shareholders is demanding the food delivery service withdraw from entire regions, threatening the board led by founder Niklas Östberg with consequences if they fail to act.

Hong Kong-based asset manager Aspex Management, which holds a 9.2 percent stake in Delivery Hero, called for a "rapid, credible strategic realignment that creates value" in a letter to management seen by Reuters on Friday. Aspex claims Delivery Hero has failed to adapt to changing industry trends. The firm stated that withdrawing from only a few of the 68 countries where Delivery Hero operates, or selling minority stakes, would not be a "credible or acceptable outcome" of the review.

Delivery Hero CEO Östberg stated that the strategic portfolio review, conducted alongside investment bankers from JP Morgan, is currently the management's top priority. He noted that numerous processes and negotiations are already underway but must be handled with care. The statement did not specify how far-reaching these measures would be. Aspex declined to comment further on the letter.

Östberg had already announced a "review of strategic options" in December, including strategic partnerships or sales of selected national subsidiaries. This was apparently a response to a previous letter from Aspex. However, the Hong Kong firm criticized that nothing substantial has happened since then.

Aspex has been invested in Delivery Hero since 2020 and, according to LSEG data, is the third-largest shareholder behind internet holding company Prosus (nearly 27 percent) and Goldman Sachs' fund division. However, following the takeover of competitor JustEat Takeaway and EU mandates, Prosus must reduce its stake to less than ten percent by autumn, with voting rights held by a trustee. Aspex accuses Östberg and his team of "value destruction," stating that Delivery Hero has lost credibility on the stock market. After a surge during the pandemic, Delivery Hero shares have lost more than three-quarters of their value since the beginning of 2022.

ASPEX DEMANDS REVIEW OF MANAGEMENT FAILURES

The letter from Aspex points out that while Delivery Hero claims to be number one in 53 of its 68 markets, it reports the lowest operating margins compared to major competitors Uber, Grab, Doordash, and Meituan. This suggests the company is either not the right owner for those markets or the business model is failing. Analysts consider the Middle Eastern subsidiary Talabat, which is also listed on the Dubai stock exchange, along with operations in South Korea and Latin America, to be Delivery Hero's most valuable assets.

Should Delivery Hero fail to commit to such steps soon, Aspex warned it would explore all legal avenues. The Hong Kong firm also took aim at Östberg himself: "This includes, above all, steps aimed at changes in the company's leadership to ensure rapid implementation of strategic changes and a review of management failures," the letter concluded. According to the major shareholder, this also includes legal risks. Delivery Hero faces potential fines and penalties of 1.4 billion euros, significantly higher than its competitors. In Spain and Italy, for instance, there are ongoing legal battles over whether the subsidiary Glovo must classify its riders as permanent employees.

(Report by Alexander Hübner and Christoph Steitz, edited by Myria Mildenberger. For inquiries, please contact our editorial office at berlin.newsroom@thomsonreuters.com (for politics and economics) or frankfurt.newsroom@thomsonreuters.com (for companies and markets).)