ISTANBUL (Reuters) - Turkish delivery company Getir has bought German rival Gorillas in a deal worth $1.2 billion that will merge two of the remaining companies in Europe promising groceries in minutes.
Serkan Borancili, who founded Istanbul-based Getir in 2015, shared the price tag on Twitter on Friday and said the combined company was now stronger.
The deal price is down sharply from Gorillas' $2.1 billion valuation in its previous funding round in late 2021 - a sign the sector has fallen out of favour as companies battle to achieve profitability, join forces, or fold.
"The move underlines that Getir is leading the consolidation," the company said in a statement.
Gorillas did not immediately respond to requests for comment. In Europe's quick commerce sector, the enlarged company will compete against Germany's Flink and U.S. company GoPuff, as well as larger meal delivery firms that also deliver groceries.
The Financial Times (FT), citing people familiar with the deal, said the deal valued the combined group at $10 billion.
Earlier this year, Getir closed a $768 million funding round led by Abu Dhabi state investor Mubadala that valued the company at around $12 billion.
The FT also said job cuts were expected as part of the deal because of considerable overlap between the two companies' network of small urban warehouses.
Getir was one of the first firms to test the quick commerce model with venture capital backing from Sequoia and Tiger Global.
Gorillas, founded in 2020 with its slogan "faster than you", was one of several others that ran with the idea during COVID-19 lockdowns, opening offices in dozens of European capitals.
Its business tripled sales in 2021 but it struggled to raise capital in early 2022 and laid off 300 people, halving its administrative staff. It shifted focus from rapid expansion to targetting a profit by 2023 before entering talks with Getir.
Getir itself is hoping to raise more funding early next year, the FT report said.
The model for rapid grocery deliveries comes with high costs as companies have to pay couriers and rent space for distribution hubs in city centres in order to get crisps, milk, pasta and other items to customers swiftly.
Analysts say the sector faces additional challenges in Europe as shoppers cut costs amid a cost of living squeeze.
($1 = 0.9486 euros)
(Reporting by Ebru Tuncay in Istanbul and Mrinmay Dey in Bengaluru; Additional reporting by Toby Sterling in Amsterdam. Editing by Jonathan Spicer, Louise Heavens and Mark Potter)