Takeaway agrees to buy Just Eat in $10bn deal

Takeaway agrees to buy Just Eat in $10bn deal (Reuters)

• While Reuters reported this as a takeover, its more strictly a merger. And of course, as with all these deals, its just discussions, Takeaway.com has until 24^th Aug to announce a firm offer or withdraw (Takeover panel rules).
• Investors in Just Eat are likely to be offered 0.9744 Takeaway.com shares for each Just Eat share, implying a value of 731p or c. a 15% premium to the closing price on the previous Friday before the possible deal was announced. As a result, Just Eat shareholders would own just over 52% of the combined group.
• The article highlights the apparent role of US activist investor Cat Rock, who is a holder of shares in both companies.
• Some analysts have highlighted the lack of overlap between the two companies (the exception being Switzerland) as being a positive feature of the proposed deal.
• Takeaway.com argues that online food ordering can be highly profitable – but only for the leading player in each market.

Analysis and comments

• The competitive situation for the two companies is very different. Takeaway’s markets have a limited overlap with Uber & Deliveroo, whereas for Just Eat the situation is the exact opposite.
• The cross border synergies between operators are limited, unless the target company is very inefficiently run.
• This deal highlights some wider lessons for similar platform type markets. Yes, the potential end market is large (& growing rapidly). But, having a large (& fast growing) addressable market is not enough on its own to ensure profitability.
• Its important to also look at the local delivery cost structure & the level of competition. On both counts the outlook for Just Eat looks challenging.
• This is an aspect of many of the new emerging companies that investors seem to miss – yes the end market looks attractive, but even if there are barriers to entry, multiple players in the market can make it really tough to select a long term winner.
• Furthermore, if the infrastructure or product is replicable – companies may sustain extended losses as they fight for market share, especially if your competitor has deep pockets.