All You Can Eat: Just Eat and Takeaway.com finalise merger deal

January 28, 2020

3 min read

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What's going on here?

Just Eat shareholders have opted to merge with the giant Dutch online food delivery marketplace Takeaway.com for £5.9bn. This will create the new company, Just Eat Takeaway.com, meaning that Prosus’ competing bid loses out.

What does this mean?

80% of Just Eat’s shareholders backed Takeaway.com’s offer of £8.89 per share, totalling up to a £5.9bn all-share offer (for more background information, see our article on the merger here). An all-share offer means that a company will buy all of another company’s outstanding shares. Takeaway.com was chosen instead of Prosus, a global consumer internet group that invests in technology, which had made a final offer of £8 per share (a £5.5bn offer). 

In August 2019, Takeaway.com agreed to buy 48% of Just Eat’s shares (a minority stake). A bidding war between Takeaway.com and Prosus started in October 2019 when Prosus made 3 bids that were all rejected by Just Eat, unconvinced by Prosus’ vision of the company’s future. Prosus’ final bid was made on 19 December 2019 with the caveat that they would not enter into an auction process or make a higher offer. 

In deciding between the two bidders, Just Eat shareholders had to choose between Takeaway.com’s offer of creating a European leader in the food delivery sector, which would see off tech competitors such as UberEats and Deliveroo, and Prosus’ wide spanning experience and technological innovation in 50 different markets. By choosing to merge with the former, Just Eat will be led by Takeaway.com’s experienced founder and CEO Jitse Groen, providing them with the strong management they were previously lacking. Combined, the new company will have 23 subsidiaries, which are mostly European but do include some in Latin America, Canada and Australia.

What's the big picture effect?

This story raises interesting questions about the influence companies may indirectly exert over potential deals and how that is managed. Prosus’ parent company, a giant tech investment firm called Naspers which is also Africa’s most valuable company, caused a lot of trouble when entering the bidding war for Just Eat. Prosus owns shares in several food delivery businesses including in Delivery Hero.

Some have questioned whether Naspers influenced the deal negotiations via their 22% minority stake in Delivery Hero. This means that Naspers will have a position on Delivery Hero’s board when they are discussing strategy. Delivery Hero has a stake in Naspers’ rival bidder Takeaway.com, which it sold in September at €73 per share. This was a 13% reduction from Takeaway.com’s previous €80 per share market valuation.  Consequently, some have argued that Naspers was indirectly impeding Takeaway.com’s bid by devaluing the company and bringing Takeaway.com’s share price near to the minimum value required for the deal to go ahead. However as Naspers only has 22% of the Delivery Hero’s shares, which does not amount to a majority (over 50%), it is not in a position to command decision-making.

Another key issue that this story raises in the problematic choice in the sector between two business models. Takeaway.com and Just Eat are primarily online food delivery marketplaces. Deliveroo on the other hand provides riders to deliver food. Most food delivery businesses are trying to diversify their business models and offer both. However, following the merger, Just Eat Takeaway.com will be able to invest more heavily into diversifying its business model due to its increased market share, thus potentially solving this problem. 

One point to note is that as the food delivery sector becomes increasingly competitive, M&As, private investment and IPOs will become increasingly common. But as everyone tries to grab a larger slice of the pie, scrutiny from regulators and governments will become ever greater. Indeed,  Amazon’s investment in Deliveroo has recently come under fire by competition regulators (for more information, see our article on that here). Despite high investor confidence, most of these companies are loss-making in a fast-evolving sector. It remains to be seen whether these investments on the growth of the food delivery will pay off in the future.

Report written by Will Holmes

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