After earlier in the week clearing Amazon’s $500 million investment into Deliveroo, the UK’s Competition and Markets Authority yesterday gave its approval for the merger of food delivery service competitors Just Eat and Takeaway.com. Deliveroo had appealed for a decision on the grounds that it would run out of cash and be forced into bankruptcy without the cash injection from the investment round led by Amazon. The combined Just Eat and Takeaway.com group have also now raised €700 million in fresh capital.
The UK’s monopolies regulator cleared the deal with the ruling it would not result in actual or potential competition on the UK market. Having approved the Amazon and Deliveroo deal, not giving its blessing to the Just Eat and Takeaway.com merger, allowing the group to also raise new capital, would also clearly have been ultimately bad for competition.
The regulator is aware that the current market environment is very different to that under which its investigations were initiated. Now it is a matter of preserving existing competition by helping companies keep afloat, rather than worrying about the potential for new competitors.
The merger between Just Eat and Takeaway, creating Just Eat Takeaway, was completed in January as far as agreement between the two sides of the deal. However, the combined company had to wait for the CMA’s approval before it could begin to integrate the two companies. That process began last week.
With Takeway.com withdrawing from the UK market in 2016, the CMA decided there was no realistic prospect the company would have returned to the country other than through the merger with Just Eat.
Of the total €700 million in fresh capital raised, €400 million is through newly issued shares sold through a placing. The remaining €300 million is in the form of convertible bonds.
Just Eat Takeaway, now headquartered in Amsterdam and listed on both the Euronext exchange in the Dutch capital as well as in London, taking over Just Eat’s former listing, is now one of the world’s largest takeaway ordering companies. It works with a total of around 155,000 restaurants and operates in the UK, much of continental Europe, Australia, Canada Mexico and Brazil. Customers choose their meal from the menus of partner restaurants hosted on the company’s website and app, pay through it and the company’s couriers pick up and deliver the meal. The partner restaurants then receive the bill minus Just Eat Takeaway’s commission and delivery charge.
Despite UK rival Deliveroo telling the CMA that it would run out of cash if Amazon’s investment was not improved, that is more to do with the fact the company is not yet profitable due to aggressive expansion in recent years. Generally, delivery services have been one of the beneficiaries of the lockdown. Just Eat Takeaway’s share price is currently similar to where is was in February, before the broad market sell-off.
Currently valued at £11.4 billion, Just Eat Takeaway is worth more than the combined market capitalisation of supermarket chains J Sainsbury, Wm Morrison and Marks & Spencer. The company’s share price did, however, fall after the completion of the recent placing, dropping £1.74 to £77.26. Shares in the placing were sold at £76.20. The six-year bonds offer an interest rate of 1.25%, convertible into ordinary shares at €121.80.
The placing was another example of the recent fundraising carried out by companies that small private investors were not invited to participate in. The company has stated the raise will be used for ‘general corporate purposes’ and to offer the flexibility for it to ‘grasp strategic opportunities’. That presumably means acquisitions if rivals begin to struggle during the economic malaise expected to grip the coming months.
Small investors were not invited to take part, nor did the directors invest. Just Eat Takeaway said the money raised was for general corporate purposes and to give it the flexibility to grasp strategic opportunities. The six-year bonds pay an interest rate of 1.25 per cent and are convertible into ordinary shares at a price of €121.80.