October 22, 2019 / 10:27 AM / 22 days ago

Delivery wars: Prosus's $6 billion offer for Just Eat sets up food fight with Takeaway

AMSTERDAM/LONDON (Reuters) - Dutch internet conglomerate Prosus PRX.AS made an unsolicited $6.3 billion cash bid to buy British food delivery firm Just Eat (JE.L) on Tuesday, using its superior firepower to try to scupper an all-share offer from rival Takeaway.com (TKWY.AS).

The offer is the first major move by chief executive Bob van Dijk since South Africa’s Naspers (NPNJn.J) spun out the company last month, creating a European tech firm valued at $120 billion, largely due to its 31% stake in China’s Tencent.

Van Dijk said the all-cash 710 pence-a-share offer was worth 4.9 billion pounds ($6.34 billion), a 20% premium to Takeaway’s offer based on the Monday closing price of its shares.

Takeaway and Just Eat agreed the terms of a merger in August that would create one of the biggest food delivery groups outside China, with leadership in Britain, Germany, the Netherlands and Canada.

A slide in the value of Takeaway’s shares, however, has reduced the value of its bid from an original 731 pence a share to 594 pence.

Just Eat said its board had unanimously rejected the Prosus offer, which “significantly undervalued” its assets and prospects, both as a standalone company and in combination with Takeaway.

Prosus’ Van Dijk said he went public to give Just Eat’s shareholders the opportunity to consider a higher bid.

“We don’t believe we’re going hostile,” he said. “We haven’t been able to agree on a proposal, but we believe that shareholders will find this offer attractive.”

He said the companies had some overlap in Brazil, where both are shareholders in iFood, and that Prosus had the financial resources needed to invest and grow Just Eat’s business.

Just Eat said it stood by the deal it agreed with Takeaway, saying that was based on “compelling strategic rationale”.

It said it had engaged with Prosus and rejected several lower offers before Prosus went public on Tuesday.

Takeaway also said its bid was superior.

“We think our bid is better as it gives shareholders of Just Eat the opportunity to benefit from the advantages of our merger,” a spokesman told Reuters. “We also offer shareholders more certainty.”

DELIVERY WAR

Analysts said a bidding war for Just Eat between the two Dutch-based suitors now loomed.

That was “always a strong possibility, given the increasingly low-ball offer from Takeaway.com”, Neil Wilson of Markets.com said. “A bidding war is now on. You may need more like 750 pence to sort this out.”

Takeaway.com shares rebounded 4.4% to 74.05 euros on Tuesday, while Just Eat shares soared 25% to 735 pence, above Prosus’ offer price.

“The Prosus offer is in many ways very cheeky and even more low-ball,” Wilson said, noting it was still below Takeaway’s initial bid and could force the firm to raise its offer “as it looks in a weakened position due to the stock’s decline”.

Prosus traded just 0.4% higher on the news.

The firm already owns stakes in various food delivery services globally, including Delivery Hero (DHER.DE), iFood and India’s Swiggy.

Just Eat however said the Takeaway deal would enable its shareholders to remain invested in the combined group, which would benefit from a strong leadership position in many major markets.

But the terms of the deal have not convinced all of Just Eat’s investors, with several top 10 shareholders, including Aberdeen Standard Investments and Eminence Capital, saying they will oppose Takeway.com’s offer.

Meetings to vote on the Just Eat-Takeaway deal are due to be held on December 4.

Analysts at Barclays said they were surprised by the move by Prosus, which they had expected to become an investor in a combined Just Eat-Takeaway.

They said Just Eat shareholders were better served by the Takeaway offer than the Prosus bid as they both stood, but that could change if Prosus were to offer toward 800 pence.

“From a Prosus equity standpoint, this signals their intention to invest big in food delivery... but we think there are some questions on their ability to add value to Just Eat versus what Takeaway.com can,” they said.

Cat Rock, a major shareholder in both Just Eat and Takeaway which had pushed for the two to combine, said Prosus’s offer “dramatically undervalued” Just Eat’s shares.

Prosus should pay at least five times Just Eat’s 2020 revenue, translating to a cash offer of at least 925 pence a share, Cat Rock said.

Just Eat has seen its earnings momentum slow as it has boosted investment in an increasingly competitive market, putting pressure on the company to combine with a rival.

Founded in Denmark in 2000, the company grew by building an online marketplace for independent takeaways, typically offering Indian or Chinese food.

Facing increased competition from food delivery companies like Uber Eats and Deliveroo, it has increasingly partnered chain restaurants such as KFC and Wagamama and has rolled out its own delivery services.

It said on Monday rapid growth in delivery and demand for broader cuisine were helping counter slower growth in its traditional marketplace in Britain.

FILE PHOTO: Signage for Just Eat is seen next to Uber Eats and Deliveroo advertisements on the window of a restaurant in London, Britain, August 5, 2019. REUTERS/Toby Melville/Files

(Graphic: Takeaway, Just Eat shares have declined since July, here)

Reporting by Pushkala Aripaka, Muvija M, Toby Sterling and Paul Sandle; additional reporting by Anthony Deutsch and Bart Meijer; Editing by Shounak Dasgupta, David Evans and Jan Harvey

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