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 24th 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.