Just Eat’s discount deal puts CEO on notice

Just Eat Takeaway.com NV

14/11/2024 08:00

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are her own.)
    By Karen Kwok
       LONDON, Nov 13 (Reuters Breakingviews) - Just Eat
Takeaway’s  TKWY.AS   CEO cannot afford another error. Jitse
Groen’s $5 billion U.S. M&A venture has been offloaded at an
embarrassing discount. The share jump of the $2.8 billion food
delivery company following the announcement of Grubhub sale
to rival Wonder suggests investors are relieved. But given the
company is trading at a discount to peers his next mistake may
be his last.
    On the face of it, the $650 million Grubhub sale is worse
for Just Eat Takeaway than it first appears. The deal consists
of $500 million in Grubhub debt, and another $100 million in
cash needed to fund daily operations. That means the
Dutch-listed takeaway firm will receive just $50 million in net
proceeds from the $5 billion all-share deal closed back in 2021.
    For any other boss such an eye-watering markdown would lead
to a swift departure. But the 20% surge in Just Eat’s shares
following the announcement of the deal suggests there is some
upside to offloading a souring business that was one of the
prime reasons the company’s shares were down 85% since June
2021. Analysts expected Just Eat Takeaway's North America
revenue to decline 8% this year, Visible Alpha data showed. 
    The discount deal can also help smarten up Just Eat
Takeaway’s balance sheet. Groen can use the proceeds to wipe out
the company’s net debt, and it will halve the company’s
share-based expenses, which analysts expected it to be $152
million in 2024, according to Visible Alpha data.
    Removing the U.S. business will also allow Groen to address
Just Eat’s depressed valuation. The business is trading at 21
times the free cash flow analysts expect it to generate this
year, versus DoorDash  DASH.O  which trades at 35 times and
Deliveroo  ROO.L  at 32 times, according to Visible Alpha data. 
    Groen’s best shot at closing that gap is flogging other
underperforming businesses. To start, he could offload the
Canadian and Australian units, which together could deliver 350
million euros, Bryan, Garnier & Co analysts reckon. Groen then
could reinvest those funds to expand in more promising markets
like Poland. Boosting growth and calling time on disastrous
deals may be Groen’s best hope at keeping his job.

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    CONTEXT NEWS
    Just Eat Takeaway on Nov. 13 said it had struck a deal to
sell its U.S. unit Grubhub to food delivery startup Wonder for
$650 million.
    The Amsterdam-listed company had been looking to offload
Chicago-based Grubhub since early 2022, after acquiring it in
2020 in a $7.3 billion all-stock deal. The acquisition completed
in 2021 with a lower valuation of 4.8 billion euros ($5
billion). 
Grubhub's enterprise value of $650 million includes $500 million
of senior notes and about $150 million cash. Just Eat Takeaway
said it expected net proceeds of up to $50 million from the
deal.
    Shares of Just Eat Takeaway were up 20% by 0803 GMT on Nov.
13. 

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Just Eat Takeaway is underperforming rivals    https://reut.rs/3O4hKsD
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 (Editing by Aimee Donnellan and Streisand Neto)
 ((For previous columns by the author, Reuters customers can
click on  KWOK/ 
karen.kwok@thomsonreuters.com))