Man Group's 1.02% Stake in Deliveroo: A Strategic Play Under the UK Takeover Code?

On July 3, 2025, Man Group PLC disclosed its 1.02% stake in Deliveroo Plc through cash-settled derivatives, marking a notable move under the UK Takeover Code. This positioning raises critical questions: Is this a speculative bet on Deliveroo's recovery, or a carefully orchestrated signal of future intentions? The answer lies in the interplay between derivatives, regulatory thresholds, and strategic calculus.

The Disclosure: A Window into Derivative-Based Stakebuilding

Man Group holds 15,291,497 cash-settled derivative securities (equivalent to 1.02% of Deliveroo's total relevant securities) without owning any direct shares. These derivatives—likely contracts for difference (CFDs) and equity swaps—allow Man to speculate on Deliveroo's price movements without formal equity ownership. Crucially, this structure avoids immediate voting rights but still triggers disclosure under the Takeover Code's 1% threshold.

The disclosure itself is a compliance milestone, but its strategic implications are deeper. By using derivatives, Man can amplify exposure to Deliveroo's performance while maintaining flexibility. Yet this approach also signals a cautious stance: the 1.02% stake sits comfortably below the 3% threshold requiring mandatory disclosure of concert party relationships or coordinated activities.

The Regulatory Framework: Derivatives as a Double-Edged Sword

The UK Takeover Code treats derivatives as part of “interest in securities,” mandating disclosures at 3% and every 1% thereafter. If Man's stake were to cross 3%, it would need to publicly detail its holdings, potentially signaling intent to a broader audience. More critically, if Man or its concert parties were to amass 30% of Deliveroo's voting rights (directly or via derivatives), a mandatory bid would be triggered unless a Rule 9 waiver is secured.

The waiver mechanism, however, has strict conditions. For instance, it applies only if the stake crosses 30% due to the target issuing new shares (e.g., in a acquisition). Even then, the transaction must be approved by independent shareholders in a general meeting. This underscores the complexity of using derivatives to build stakes incrementally.

Strategic Implications: Speculation or a Takeover Prelude?

Man's move could reflect two strategic narratives:

1. Speculative Engagement: The derivatives allow Man to bet on Deliveroo's recovery without the risks of full ownership. With Deliveroo's stock price volatile post-pandemic, this position could be a leveraged play on operational improvements or market consolidation in the food delivery sector.

2. Preparation for a Bid: By using derivatives, Man avoids triggering early disclosure obligations, preserving strategic ambiguity. If Deliveroo's valuation dips further or Man identifies synergies, converting derivatives into shares (or coordinating with others) could position it to push for control without immediate regulatory scrutiny.

Investment Considerations: Risks and Opportunities

Investors must weigh several factors:

• Regulatory Risks: If Man's derivatives are deemed to create an “economic interest” under the Takeover Code, even small incremental purchases could force disclosures. This could pressure Deliveroo's stock if perceived as a hostile signal.
• Market Dynamics: The UK's evolving regulatory environment—highlighted by the July 2025 Practice Statement 36 (PS36)—emphasizes transparency in takeover terms. Investors should monitor whether Man's position aligns with broader industry consolidation trends.
• Valuation Uncertainty: Deliveroo's post-pandemic performance and profitability remain uncertain. A potential bid would hinge on whether Man can justify a premium, especially if PS36's rules on unlisted share alternatives restrict flexibility in structuring offers.

Conclusion: A Delicate Balance

Man Group's 1.02% stake is a deft maneuver that balances speculation and strategic signaling. For investors, it underscores the need to track regulatory thresholds and Man's future activity. While the current stake is small, the use of derivatives hints at a long game—one where Deliveroo's trajectory and the Takeover Code's strictures will determine whether this is a fleeting bet or the opening move in a high-stakes takeover.

Investors should remain vigilant for further disclosures, monitor Deliveroo's operational updates, and assess the broader consolidation landscape. The stakes—both literal and figurative—are high.