Undated handout photo of someone using the Just Eat mobile phone app. Food . .delivery company Just Eat. Just Eat had in 2019 rejected a takeover offer from Prosus, saying that the $6.2 billion cash offer undervalue it. Picture: Just Eat/Via AP
Prosus's share price fell over 7% on Monday after it announced a large €4.1 billion (R78.96bn) online food delivery company acquisition in Europe, Just Eat Takeaway.com, its second big deal in as many months.
The Amsterdam-based Naspers subsidiary said Monday it reached an agreement to acquire Just Eat, to create the fourth largest food delivery group globally. In December, Prosus also announced the acquisition of Despegar, an online travel agency in Latin America, for about €1.62bn. In Amsterdam, Just Eat’s share price shot up 53% on Monday.
Prosus plans to acquire all Just Eat’s shares for €20.30 per share cash. The price represents a 49% premium to the 3-month weighted average price as of February 21, and a 22% premium to Just Eat’s highest share price over the last three months.
“Prosus already has an extensive food delivery portfolio outside of Europe and a proven track record of profitable growth through investment in our customer and driver experiences, restaurant partnerships, and world-class logistics, powered by innovation and AI,” Prosus CEO Fabricio Bloisi said in a statement.
Anchor Capital chief investment officer Mike Gresty said part of the reason for the lower share price was a decline at the same time in the share price in Prosus’ largest investment, which is a 29% stake in China internet group Tencent.
The other reason was some investors were questioning capital allocation at Prosus, as the food delivery sector globally had not performed to expectation. Prosus already has a food company investment in Europe, Delivery Hero, and there were bigger internet growth markets than food delivery, said Gresty.
“If the new CEO can deliver on his promise of growing the e-commerce ecosystem at Just Eat, then he will be the hero,” said Gresty.
Gryphon Asset Management research analyst Kasparus Treurnicht said Prosus’ lower share price was likely due to investors feeling that Naspers had again overpaid for an acquisition, and the rise in Just Eat’s share price in Amsterdam “pretty much says it all.”
He said the transaction was disappointing for investors, given the high hopes that the market had for the group after Bloisi’s appointment last July.
IG.com senior analyst Shaun Murison said the acquisition aimed to expand Prosus’s food delivery presence in key European markets where Just Eat holds leading positions: the UK, Germany, and Netherlands.
The deal combined Prosus’s technological capabilities and operational expertise with Just Eat’s strong brand recognition and market presence, and it was an opportunity to apply Prosus’s successful iFood strategies to enhance Just Eat’s performance.
Prosus said it has invested more than $10bn globally to drive the momentum of its food category, which spans more than 70 countries. Its portfolio includes iFood, the Latin America food delivery platform, a 28% stake in Delivery Hero, and about 4% in Meituan, the world’s largest food delivery business. Prosus also holds 25% of Swiggy, the food and grocery delivery platform in India that was recently listed.
Bloisi said in a presentation the deal was an opportunity to grow Just Eat “many times over.” In the US and China, the market leaders in food delivery had over $100bn businesses, and while the European market was smaller, there was an opportunity to grow Just Eat into a similarly sized market leadership position.
He said the aim was to grow “really fast,” and new employment opportunities were likely to arise in, for example, technology, restaurants, and even drivers.
As an indication of Just Eat’s financial health, it last reported earnings before interest, tax, amortisation, and depreciation (EBITDA) of $313 million, and the guidance for this year was between $360m and $380m, while the company had also done a lot in recent years to invest in new technology and optimise its operations.
“Just Eat Takeaway.com is now a faster growing, more profitable, and predominantly European-based business. Prosus fully supports our strategic plans, and its extensive resources will help to accelerate our investments and growth across food, groceries, fintech, and other adjacencies,” said Just Eat Takeaway.com CEO Jitse Groen.
“Its success within the UK, Germany, and the Netherlands has led to profitable, cash-generative operations, with considerable growth potential, which Prosus intends to build upon,” Bloisi said.
He said Prosus’s growth strategy at iFood, in Brazil, would provide a ready guide to transform Just Eat’s growth path through renewed focus across tech, product features, demand generation, offer quality, and service.
Just Eat Takeaway.com operates in 17 international markets, with leading positions in the majority of its markets. Across its markets, it connects 61 million customers with over 356,000 local partners.
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