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European Delivery Service Just Eat Takeaway Acquires Grubhub for $7.3B

The on-demand food delivery space is getting a significant consolidation as European company Just Eat Takeaway has announced a deal to acquire Grubhub in the United States.
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The on-demand food delivery space is getting a significant consolidation as European company Just Eat Takeaway has announced a deal to acquire Grubhub in the United States.

According to a press release published yesterday, Just Eat Takeaway is expected to work through the details and finalize a $7.3 billion acquisition by early 2021.

The Making of a Global Food Delivery Giant

The deal will undoubtedly be a significant undertaking. As Just Eat Takeaway explained in its press release, both firms’ combined strength will see them process orders for over 70 million global users in a year.

The press release also confirmed that this would be an all-share deal. All Grubhub shareholders will get 0.6710 of ordinary shares in Just Eat Takeaway in exchange for their Grubhub shares.

Calculations show an implied value of $75.15 for each Grubhub share, thus putting the company’s equity consideration at about $7.3 billion.

As part of the deal, Mark Maloney, the chief executive of Grubhub, will join the management board of Just Eat Takeaway. He will lead the combined group’s business endeavors across North America. As expected, the global conglomerate will continue to operate under Just Eat Takeaway chief executive Jitse Groen.

 “Matt and I are the two remaining food delivery veterans in the sector, having started our respective businesses at the turn of the century, albeit on two different continents. Both of us have a firm belief that only businesses with high-quality and profitable growth will sustain in our sector,” Groen said in the statement.

Grubhub’s Road to an Acquisition

Grubhub has been searching for a buyer for quite some time. It started when the company and Uber discussed a potential acquisition. The move by Uber was smart.

Uber could combine Grubhub with its UberEats food delivery service to become a behemoth and possibly take on market leader DoorDash. However, the potential for such an acquisition immediately raised eyebrows on Capitol Hill.

Several United States senators wrote a letter to Assistant Attorney General Makan Delrahim and Federal Trade Commission Chairman Joseph Simons, asking them to scrutinize the deal.

Led by Minnesota Democrat Senator Amy Klobuchar, the letter pointed out that online food delivery has become more critical to Americans in the wake of the global pandemic. However, a merge of such proportions – especially at this time – could lead to significant competition issues down the line.

“It is particularly troubling that this merger is being contemplated during a pandemic, when consumer demand has increased and when restaurants are more desperate for revenue than ever,” the letter read, per CNBC.

Uber was also reportedly discouraged by some of Grubhub’s unsavory practices, including the use of misleading phone numbers and phony sites, charging predatory fees, and others.

However, the regulatory pressure is most likely the most significant reason why the ride-hailing service balked at the deal. While regulatory will most likely scrutinize the deal with Just Eat Takeaway, there is little concern that it would be as thorough as what would have happened if Grubhub went with Uber.

Just Eat Takeaway itself is the product of a merger that happened earlier this year. According to an approval document from the United Kingdom’s Competition and Markets Authority (CMA), the merger happened between British food delivery service Just Eat and Dutch competitor Takeaway.com.

The merger reportedly came at a £6.2 billion ($7.8 billion), and the joint company announced a successful €700 million ($756 million) funding round almost immediately. The company had announced that it’d use the funding to pay down debts and make future acquisitions.

It would appear that Grubhub was one of the firm’s plans. Just Eat Takeaway now has a significant business portfolio in the United States, making it a top global market player for sure.

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Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works. jimmy@moneycheck.com

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