I thought Just Eats acquisition of Menulog last year for AUD 855m was expensive in Just Eat my hat (part 1) http://www.stockopedia.com/content/just-eat-my-hat-98395/
The same team are on the acquisition trail again. This time it's buying takeaway websites in Italy, Spain, Brazil and Mexico for €125m from Rocket Internet and FoodPanda looks again on the expensive side. Collectively these businesses lost €16m last year but are expected to contribute €5m to EBITDA in 2017 and €10m by 2018. Few operating financials are given apart from an 83% increase in orders for the acquired businesses. Great ! absolutely no base revenue number, customer numbers or any cost data. A total trust me situation. I think they are slightly treating shareholders as idiots. That's some big operational leverage and synergistic benefits that management expects. Again no basis on which shareholders can interrogate this.
On the positive sidfor the share price, I think market participants will like this move as it is evidence of in-market consolidation. However another way of thinking about it is maybe there are too many new competitors which will dilute returns for all unless the market is more consolidated.
The interesting thing is that Just Eat only acquired assets in Mexico and Brazil last year from SinDelantal (according to website TechCrunch) and already has its website operating in Italy and Spain which were also acquired from SinDelantal. I guess this is the frantic customer acquisition period that JE sees as its way of becoming the number 1 player in each territory. Meanwhile Rocket Internet, which pumped money into competitor Delivery Hero and a number of other takeaway aggregator websites in Feb 2015, is selling the websites to Just Eat. This raises the question "why?" in my mind. They only bought the websites they are now selling in Feb last year. They have only owned them for a year, pumped loads of money in and are now selling them. All very strange in my mind. Three scenarios are likely: Rocket internet needs cash (very likely) or these businesses have not performed well and they are selling them (maybe) or finally Just Eat has offered an incredible price (very likely).
The growth looks all very attractive for the core and acquired businesses but the cynic in me looks at the valuation, even after the recent 25% fall in the…
The Samwer bros (Rocket Internet) normal business model is to find a concept that's taking off in the English speaking markets, simply copy it shamelessly, and then sell it to the anglo-world player when they want to expand internationally. The value to the buyer is the customers, as a ready-made customer base and removing what would otherwise be their main competitor in that new market. That value is likely to be above what the company would be worth as a regional #2, so it can be a mutually beneficial transaction. Amazon, Ebay, etc have bought their clones. That they "need cash" is not likely.
