Just Eat Takeaway faces humiliating US exit

A Just Eat delivery man is seen in Nice, France, February 16, 2021. REUTERS/Eric Gaillard

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LONDON, April 20 (Reuters Breakingviews) – Jitse Groen is making an embarrassing back and forth on mergers and acquisitions. The chief executive of Dutch food delivery company Just Eat Takeaway.com (TKWY.AS) said he was considering selling all or part of the US branch Grubhub, less than a year after buying it for 7 .3 billion. It couldn’t come at a worse time.

The purchase of Grubhub always seemed excessive when Groen closed the takeover in June last year. It is an underdog in the competitive US market, ranking third in market share after DoorDash (DASH.N) and Uber Eats. The situation has not changed much since. As of last month, DoorDash still handled more than half of U.S. meal deliveries, and Grubhub’s market share remained at around 14%, according to data from Bloomberg Second Measure. Worse still, US cities, including New York, have capped the fees food delivery companies can charge restaurants, making it harder to make a profit. In 2021, Just Eat Takeaway’s North America business, which also includes the Canadian unit, generated negative EBITDA of €28 million.

Investors punished Groen for his ambition. Shares of Just Eat Takeaway have lost more than 70% over the past year, underperforming regional rivals Deliveroo (ROO.L) and Delivery Hero (DHER.DE). The company is worth only 6 billion euros. Activist investors such as Cat Rock Capital, which has a 5% stake, have called for a sale in the United States.

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Still, abandoning the US business now will prove tricky. The Trustbusters would frown on a deal involving rivals like Uber Eats or a big tech company like Amazon.com (AMZN.O). And, given Just Eat’s struggles and possibly American resistance, global players like Meituan (3690.HK) may be hesitant to follow him to America. This makes it likely that Groen will have to take a big loss. Goldman Sachs analysts have estimated that Grubhub could be worth around 3 billion euros in January. Yet since then valuations of delivery groups have fallen, in part on fears that rising inflation will hurt consumers. Applying a 1.1 times 2021 sales multiple to Grubhub, the average of European peers Deliveroo and Delivery Hero, would spit out an enterprise value of just under €2 billion, according to an estimate by Breaking views.

There may be a silver lining. If Groen can exit the tricky U.S. market, the rest of his business might start to look a bit more appetizing for a merger partner. Groen’s trading days may be just beginning.

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– Just Eat Takeaway.com is considering selling Grubhub, the U.S. business it bought for $7.3 billion in 2021, the food delivery company announced on April 20.

– Chief Executive Jitse Groen said on a call the company had hired advisers and started a formal process to explore a sale, but warned there was no certainty that would result in a transaction. On the same day, the company warned that the gross value of transactions it processed in 2022 would only grow by around 5%, slower than previous forecasts of around 15% growth.

– Shares of Just Eat Takeaway have fallen more than 70% in the past 12 months. Shares of rivals DoorDash, Delivery Hero and Deliveroo fell 26%, 73% and 56% respectively over the same period.

– Just Eat Takeaway shares were up 3.5% at 07:56 GMT on April 20.

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Editing by Neil Unmack, Streisand Neto and Oliver Taslic

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