Food delivery service Just Eat just found itself at the center of a what could become a massive bidding war for the company.
The service, which is based in London and has operations in multiple countries, confirmed in July a £9 billion ($11.6 billion USD) all-stock deal to merge with Dutch delivery company Takeaway.com, saying the two companies had reached a preliminary agreement. But this week, tech investment firm Prosus, a spinoff of tech conglomerate Naspers, showed up to the party as a seemingly unwelcome third guest. Or as the Financial Times put it, Naspers “has tried to gatecrash a merger of two of Europe’s biggest food delivery groups.”
According to FT and others, Prosus had been in talks with Just Eat previously. After failing to reach an agreement, the former went to directly to Just Eat shareholders with a counter offer of £4.9 billion (roughly $6.3 million USD), in what’s called a hostile bid.
Just Eat rejected the bid, saying in a statement that it “significantly undervalues Just Eat and its attractive assets and prospects both on a standalone basis and as part of the proposed recommended all-share combination with Takeaway.com.”
Prosus offered 710 pence per share in cash for Just Eat. In comparison, Takeaway.com’s original all-stock offer from July valued Just Eat at 731 pence per share, but thanks to Takeaway’s declining stock, that number has dropped all the way down to 595 per share in the last few months.
On the surface, that would make the Prosus offer more attractive — in the short term. But Just Eat has said its decision to stand by the Takeaway deal is based on “compelling strategic rationale.” As Just Eat noted in a press release from July, when it announced the merger, the combined group has “compelling strategic logic and represents an attractive opportunity for both companies to build on the strong individual platforms of Just Eat and Takeaway.com with the potential to deliver substantial benefits to respective shareholders, customers, employees and other stakeholders.”
In other words, combining two companies who already hold a massive global presence on their own in the food delivery sector would create an entity strong enough to stand up to competition. Deliveroo raised a £450 million (~$575M USD) round this year, a sizable chunk of which came from Amazon. Uber Eats also has a massive presence across every livable continent on the globe.
Even so, shareholders still have to approve the deal. According to FT, some have “voiced opposition” to it, including Aberdeen Standard Investments and Eminence Capital, who “dismissed” the deal as grossly undervaluing Just Eat. Shareholders will vote on December 4 whether or not to approve the deal.
Prosus has stakes in multiple food delivery companies, including Swiggy and Delivery Hero, but the company isn’t yet considered a heavyweight in the food delivery sector. Its deal, while financially attractive, would likely lack the synergy Just Eat seems to think is so vital to the Takeaway merger.
At the very least, Takeaway could very well have to raise its offer price in the wake of Prosus’ counter offer, igniting a bidding war that could have a ripple effect across the industry as competition among food delivery companies heats up.