Food delivery firm Just Eat Takeaway (JET) has launched another opportunistic cross-border land grab after agreeing to buy US firm Grubhub in a $7.3bn deal.
The deal would represent Just Eat Takeaway’s first steps into the US online food delivery market, where Grubhub dominates. It would create a combined business that processed around 593m orders in 2019 for more than 70m combined active customers globally.
PROFITABLE PLATFORM
It would also make one of the few profitable players in an exciting growth space that has become increasingly competitive in recent years. US firm Uber has been running its Uber Eats operations for several years, while Deliveroo has been the subject of investment by Amazon.
‘Success in the US depends on deploying the right mix of logistics and marketplace region-by-region, a balance Grubhub has achieved with profitable leading positions in key US markets,’ Just Eat Takeaway said.
But this is a risky move, coming so quickly after the £6bn merger that saw the UK’s Just Eat combine with Dutch firm Takeaway.com late last year.
INDIGESTION WORRIES
Investors’ initial response suggests that there are deep concerns that the company may be biting off more than it can chew. When talks were first revealed late yesterday afternoon Just Eat Takeaway’s share price plunged, closing 13% down at £76.26.
Today’s modest bounce (less than 0.5%) to £76.58 reflects those concerns.
But some analysts believe the deal makes sense. ‘With Grubhub's margins becoming increasingly under pressure, it has been looking for a new partner to add scale,’ said Megabuyte analyst Amir Fattahi.
‘This was initially expected to be Uber but a high likelihood of a potentially tough regulatory/antitrust probe casted a shadow on such a deal being able to take place. With its European roots, a deal with Just Eat Takeaway.com, therefore makes much more strategic sense.’
