The food delivery market is continuing its recent trend towards consolidation with yesterday evening’s announcement that Just Eat Takeaway.com is to acquire U.S. peer Grubhub for $7.3 billion. JustEat Takeaway was itself only recently born as the result of an all-share £10 billion merger between London-listed JustEat and Amsterdam-listed Takeaway.com. The combined group is listed on the Amsterdam Stock Exchange.
With the addition of Grubhub, which is subject to regulatory approval, JustEat Takeaway will become the biggest food delivery group in the world outside of China. The accepted $7.3 bid for Grubhub will represent an ‘all paper’ deal involving no cash element.
While the online food delivery market is growing quickly, accelerated further by the Covid-19 crisis, the nature of the business model and cut-throat levels of competition have meant companies have found it very difficult to actually make any money. That is now leading to a period of consolidation, with the sector’s landscape likely to be dominated by a small number of big players over coming years.
Yesterday’s announcement on the takeover deal caught markets by surprise with the U.S. group having spent the past several weeks in talks over a deal with ride hailing and food delivery giants Uber. However, with negotiations ultimately stalling on antitrust issues, JustEat Takeaway pounced quickly.
Grubhub, which also owns the Seamless brand among several other subsidiaries, was founded in 2004 by two web developers who regularly found themselves looking through an assortment of takeaway menus. It was one of the first successful companies in the takeaway aggregation platform and deliveries space. The company went public in 2014 and lists around 300,000 takeaway and restaurants across 4000 U.S. cities.
The paper deal struck between the two companies values Nasdaq-listed Grubhub’s shares at about $75.14 and will see its shareholders take equity worth around 30% of the newly combined company. Grubhub’s share price was up by a marginal 0.3 cents following yesterday’s confirmation of the agreement in principle and trading at $58.24.
Shares in Amsterdam-listed JustEat Takeaway, meanwhile slumped by 13.3% yesterday to €85.50. That values the company at a total market capitalisation of €12.7 billion.
Source: Bloomberg Markets
The deal with JustEat Takeaway isn’t expected to encounter the same regulatory problems as those that troubled talks with Uber, because the European group currently has no business operations in the USA. If anything, competition levels in the USA are even more intense than those in Europe, with venture capital-funded rivals such as Door Dash engaged in a bitter struggle being fought with enticements for new customers such as discounts and promotions.
The newly-enlarged group, should the deal be given regulatory approval, will remain domiciled in Amsterdam but will retain Grubhub’s Chicago HQ as its North American head office. It also has a significant presence in the UK. A joint listing will see shares also trading on the London Stock Exchange and via an ADR listing in the USA.
Grubhub’s co-founder and chief executive Matt Maloney will continue to lead the North American business of the combined company, which will also include Skip The Dishes, JustEat’s Canadian brand. JustEat Takeaway chief executive Mr Groen commented that both himself and Mr Maloney were “the two remaining food delivery veterans in the sector, having started our respective businesses at the turn of the century”.
The enlarged business will serve 71 million active customers and combined platform revenues last year would have equalled €2.7 with €402 million in underlying profits from 593 million food orders.
If regulatory approval is granted, the deal is expected to complete during the second half of 2020.
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