Eating Up the Competition: JustEat join with Dutch company in £9bn merger
September 2, 2019
2 min read
What's going on here?
JustEat and Takeaway.com plan to merge to create the second largest online food delivery business, after China’s Meituan.
What does this mean?
This potential merger will create a £8.2 billion company, JustEat Takeaway.com, that is headquartered in Amsterdam and listed on the London Stock Exchange. Takeaway.com has previously bought Delivery Hero’s German operations for €930m, whilst JustEat bought out Hungryhouse for £200m. JustEat currently trades internationally as Skip The Dishes in Canada, Menulong in Australia and New Zealand and is part of a joint venture called iFood in Mexico and Brazil. Currently, Takeaway.com serves markets across Europe, Vietnam, and Israel. Therefore, the potential merger ensures an even stronger international presence.
Why should law firms care?
This story shows growing consolidation in the online food delivery industry. That same week, DoorDash, a US delivery start-up, announced a $410m acquisition of delivery app Caviar. Food delivery companies have been increasing in scale to compete with global rivals Uber Eats and Deliveroo. Earlier this year, Amazon announced a £575 million investment in Deliveroo, which will probably see the London-based food company expanding its reach and launching new products. Meanwhile, UberEats will be developing its business model through drone delivery and partnering with Apple Card.
JustEat has been under pressure from activist investor Cat Rock to shed its stake in iFood and to initiate merger discussions with rivals. A merger will allow both companies to cut costs by combining processes and reducing redundancies, facilitate global expansion, and may catalyse technological development. However, this could result in job cuts, which may damage their reputation since JustEat just announced redundancies earlier this year. Moreover, increasing scale will be insufficient for food delivery companies to stay ahead of their game, and JustEat Takeaway.com, if it does come into creation, must adopt innovative processes to distinguish themselves.
It will also be interesting to see how the profitability of a potential JustEat Takeaway.com will play out, and whether they will achieve economies of scale. Gaining orders does not necessarily correlate to profitability, as small deliveries can create large operating losses, and the company’s investment in technology will determine its efficiency and profits.
Developments in the food delivery sector have impacted other areas of the food industry. The business models of restaurants have changed, with restaurants running “dark kitchens” specially to produce food for delivery customers. Restaurant chains will likely benefit from increasing opportunities to partner with delivery services, but supermarkets may suffer losses in return.
Report written by Rachel Tay
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