Amazon’s plan to acquire a 16% stake in online food delivery company Deliveroo was cleared by the UK’s Competition and Markets Authority (CMA) following more than a year of deliberations.
Amazon (AMZN) announced back in May last year that it will own the 16% stake in Deliveroo as part of a $575 million funding round, alongside other investors.
CMA Inquiry Chair, Stuart McIntosh said that the regulator “concluded that the transaction will not result in a substantial lessening of competition in either restaurant delivery or convenience grocery delivery”.
“Our decision reflects the scale of Amazon’s investment in Deliveroo (16% of the company’s equity) and its incentives to compete in both markets,” he added. However, if Amazon “were to increase its shareholding in Deliveroo, that could trigger a further investigation by the CMA”.
The CMA’s final decision to clear the deal on competition grounds is the culmination of extensive analysis of internal documents from Amazon and Deliveroo, a survey of more than 3,000 consumers, and extensive submissions from interested third parties.
Deliveroo operates in over 500 towns and cities across 14 markets, including Australia, Belgium, France, Germany, Hong Kong, Italy, Ireland, Netherlands, Singapore, Spain, Taiwan, United Arab Emirates, Kuwait and the UK.
Shares in Amazon have been on a steady winning streak jumping a stellar 70% so far this year, with the $3,678.15 average analyst price target implying another 17% upside potential is lying ahead in the coming 12 months.
Commenting on the UK regulatory approval Needham analyst Brad Erickson said: “Although not imminent in light of last week’s congressional hearing, we think this increases the odds Amazon makes a similar investment in the U.S. at some point with DoorDash likely making the most sense if we had to guess.”
Needham has a Buy rating on AMZN stock with a $3,700 price target.
Overall, AMZN scores 37 Buy ratings from analysts versus 2 Holds adding up to Strong Buy consensus. (See Amazon stock analysis on TipRanks).