Just Eat's New Head Chef Would Be Mightily Expensive

(Bloomberg Opinion) -- If the British food delivery company Just Eat Plc. had a shortlist of dream chief executive appointees, Jitse Groen, the founder and CEO of Dutch peer Takeaway.com NV, would probably top it.

So the prospect of Takeaway.com acquiring Just Eat for 5 billion pounds ($6.2 billion), and Groen leading the new entity, is appealing. The Amsterdam-based firm on Monday announced the all-share bid, which would see Just Eat investors owning 52% of the combined company.

Essentially the approach is a gamble on the ability of Groen to improve Just Eat’s competitive footing against Uber Inc.’s food delivery arm and the Amazon.com Inc.-backed Deliveroo. He’s already succeeded in hounding the well-capitalized Delivery Hero out of much of Europe, and he’s continued to expand Takeaway.com apace in its home market despite fierce competition from Uber Eats, whose regional HQ is in Amsterdam.

Just Eat has focused traditionally on being a marketplace rather than a delivery network: It connects customers with restaurants, who take care of their own deliveries and pay a fee to Just Eat. That’s a higher margin business than Uber Eats, which has to pay its own network of drivers and riders.

While the no-driver strategy is appealingly light on capital requirements, it also puts a limit on growth because many restaurants don’t want the hassle or cost of their own delivery teams. In response, Just Eat has started building its own army of couriers but the effort is yet to reap many rewards.

Takeaway.com shareholders will be wary about exposing themselves to a U.K. price war with Deliveroo and Uber, but there are some grounds for optimism. While Just Eat’s growth has faltered in the past year, it has done so amid a leadership vacuum. The former CEO Peter Plumb departed in January. With the operational and strategic improvements promised by Groen, the situation oughtn’t be as dire.

The approach is opportunistic, to say the least – highlighted by the spike in Just Eat’s share price on Monday to well above the implied offer. Takeaway.com’s market capitalization only surpassed Just Eat’s in May. The latter’s stock has been suffering after Amazon.com led a new $575 million round of investment in Deliveroo, an injection of cash that ensured the continuation of the three-way British scrap with Uber. Just Eat has three times as much revenue as Takeaway.com, and is profitable, but it’s growing more slowly.

The 15% bid premium to Friday’s share price might seem measly, but it’s a reasonable compromise given the risks of that U.K. price war. Just Eat investors would be essentially paying for Groen and his team’s nous, and they would enjoy the upside should his efforts succeed.

The bid gives Just Eat an enterprise value of about 4.8 times estimated 2019 revenue, compared to Takeaway.com’s 13 times. Groen is an astute portfolio manager, giving further cause for confidence. He might be more willing to exit Just Eat’s investments in Brazil and elsewhere. The U.K. company’s management has been wary about divesting those stakes, despite calls from some investors to do so.

Just Eat’s shares jumped to as high as 833 pence, well above the implied 731 pence offer price, as investors anticipated a counter-bid. Even if such an offer wasn’t forthcoming, the new combined company could in turn become a bid target. Amazon, Uber and Naspers Ltd (a shareholder in Delivery Hero) have big ambitions in food delivery. 

It looks like this particular takeout could be that rare occurrence of a deal that suits both sides, where they can have their cake and eat it too.

To contact the editor responsible for this story: James Boxell at jboxell@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.

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