Amazon Wins Nod for Deliveroo Investment From U.K. Regulators

Amazon's investment in Deliveroo, a restaurant and food delivery service in the United Kingdom, is poised to move forward
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Amazon  (AMZN) - Get Report won a potentially Pyrrhic victory Friday, with regulators in the United Kingdom giving provisional approval to the tech giant's bid to become the lead investor in Deliveroo on the grounds the battered restaurant delivery service would otherwise collapse.

The U.K. Competition and Markets Authority granted preliminary approval to Amazon's $575 million investment in Deliveroo, with a final decision coming in June.

While Amazon announced the deal nearly a year ago, it had been held up by the UK anti-trust regulator out of concerns over the impact on competition in restaurant and food delivery service.

However, the CMA said in a statement that financial advisors for Deliveroo presented evidence detailing the precarious financial situation of the company.

While Deliveroo has seen an increase in grocery orders since the U.K. went into lockdown amid the coronavirus crisis, it has not been enough to stem the losses from its once-thriving restaurant delivery service, the regulator noted.

"Deliveroo's exit from the market would be inevitable" without the infusion of cash from Amazon, the CMA found. "The imminent exit of Deliveroo would be worse for competition than allowing the Amazon investment to proceed."

The tentative approval of its Deliveroo investment comes as Amazon grapples with challenges on multiple fronts. Its stock is trading at close to an all-time high, however, as customers flock to order items on its platform amid stay-at-home orders in many countries. 

Amazon has closed all six of its distribution centers in France after a court in that country hit the tech company with fines of $1.1 million a day until the company produces a plan to provide better Covid-19 protections for employees.

Shares of Amazon were falling 2.25% to $2,354.01 a share on Friday late morning.

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