Analysts have reacted positively to the news of the possible merger between Just Eat and Takeaway.com. Notably Cat Rock Capital, an activist investor in Just Eat which publicly called for it to merge with a competitor last February.

“We would like to commend Chairman Mike Evans and the Board for taking clear and decisive action to realize Just Eat’s great potential, particularly in a structure that allows long-term shareholders to participate meaningfully in future value creation,” said Alex Captain, founder and managing partner at Cat Rock Capital.

“The proposed transaction is excellent news for Just Eat shareholders. The combined company would be an exceptionally high-quality business with formidable market positions in major countries, fantastic growth prospects, and world-class management.”

“We support the Board’s work in evaluating and consummating a transaction that maximizes long-term shareholder value over the coming weeks.”

Meanwhile Russell Pointon, analyst at Edison Investment Research said the “key feature” of the combination of Just Eat and Takeaway.com is the “limited geographic overlap between the companies. Therefore there will be limited consolidation of market shares in their combined markets. The companies would share best practice and know how etc. to help improve profitability to invest further behind their less profitable markets and fund the fights for market share in what is likely to be a very competitive market.

“Following speculation over the weekend the companies have confirmed they have in principle reached an agreement for a potential share combination resulting in Just Eat and Takeaway.com owning 52.2% and 47.8% respectively of the combined group. Each Just Eat share would receive 0.09744 Takeaway.com shares, giving an implied valuation of £7.63 using share prices this morning, so the share price of £7.72p is already trading at a premium to this.

“The companies are geographically diverse although are quite concentrated from a revenue and profit perspective, highlighting the early stage development of many of their smaller markets. Just Eat derives 78% of revenue from the UK, Canada, and Australia and New Zealand with the UK still representing more than 100% of the group’s underlying EBITDA. Takeaway.com derives 85% of revenue from the Netherlands, Germany (recently acquired from Delivery Hero) and Belgium.

“There is limited geographic overlap between the companies, with the only overlap being Switzerland. Just Eat has operations in Australia, Brazil, Canada, Denmark, France, Ireland, Italy, Mexico, New Zealand, Norway, Spain, Switzerland and UK. Takeaway.com has operations in 12 countries: Austria, Belgium, Bulgaria, Germany, Israel, Luxembourg, Netherlands, Poland, Portugal, Romania, Switzerland and Vietnam.

Just Eat is the larger company with respect to KPIs but had a smaller market cap and EV prior to the deal. In 2018, Just Eat had 26.3m customers versus Takeaway.com’s 14.1m, Just Eat had 221m orders versus Takeaway.com’s 94m; Just Eat’s revenue was £780m versus Takeaway.com’s €232m; and Just Eat’s underlying EBITDA was c £180m versus an adjusted EBITDA loss of c €11m for Takeaway.com.”

And Jonathan Buxton, partner and head of consumer at Cavendish Corporate Finance, said the preliminary merger agreement could mean Just Eat “now has the ability to establish itself as a global leader. Despite tough competition in the UK market from rivals Uber Eats and Deliveroo, Just Eat remains the market leader, with its quarterly results showing orders rising by 7.4% to 31.9 million, with group revenues for the first quarter jumping 28% from a year earlier to £227.9m.

“This transaction will see Just Eat grow from a market leader in the UK to one of the largest online food delivery outfit in the world, with combined value of orders that both companies received in 2018 worth €7.3bn. Just Eat’s business model allows them to scale quickly, as they are purely an online platform, without the constraints faced by Deliveroo and Uber Eats, which have to recruit their own couriers as they expand.

“In an increasingly competitive food delivery industry, this move doesn’t simply allow Just Eat to benefit from greater scale but also an improved ability to deploy capital and strengthen its competitive position across the globe. Despite Just Eat being the larger company, I would not be surprised to see a rebranding to Takeaway.com as a single global brand in the near future.”

 

 

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