Amazon offers Deliveroo “significant” loan as CMA probe continues
Amazon is understood to have offered UK delivery giant Deliveroo a “significant” loan in order to prevent it running low on capital as an investigation into the tie-up continues.
Deliveroo saw Amazon lead a $575 million funding round in May last year in which it is set to acquire an undisclosed minority stake.
The tie-up between the two companies was forcibly put on hold by the UK’s Competition and Markets Authority (CMA) in July as competition concerns were raised.
The CMA announced last month that it would launch a more in-depth Phase Two investigation after its initial probe found there was “a real risk” of the deal harming competition.
According to a Bloomberg report this drawn out investigation is understood to have threatened Deliveroo’s cash reserves, leading Amazon to offer it a loan to protect its investment, which is not allowed under the Enforcement Order issued by the CMA in June.
Following this morning’s report, Amazon said that the loan will be converted into equity if the CMA approves the deal, adding that it continued to “to comply with the Initial Enforcement Order issued in June, which requires the parties to operate separately and restricts the parties from entering into non-ordinary course agreements like a loan. Deliveroo and Amazon have been working closely with the CMA and will continue to do so.”
This move signifies Amazon’s commitment to breaking into the food delivery market in the UK, an industry it has so far been unable to conquer.
Amazon’s investment comes after it scrapped its own delivery rival Amazon Restaurant in the UK in December 2018, suggesting it is planning to subsidise its failed service by using the well-established Deliveroo.
Deliveroo, which now operates in 14 countries after being launched in the UK in 2013, said it will use the funds to expand its technology team at its London headquarters, and develop new tool to “offer riders flexible and well-paid work”.