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Just Eat Takeaway risks heartburn with U.S. deal

3 minute read

A Just Eat delivery rider is seen in Nice, France, February 16, 2021. REUTERS/Eric Gaillard

LONDON, June 16 (Reuters Breakingviews) - The enlarged Just Eat Takeaway.com (TKWY.AS) is not yet appetising for investors. The Dutch food delivery company on Tuesday completed the $7.5 billion takeover of stateside rival Grubhub, its second big bite in just over a year. Boss Jitse Groen has repeatedly outmanoeuvred rivals in Europe. But he is starting from a weaker position in the United States.

Groen launched the Grubhub takeover a year ago, just two months after wrapping up the $7.2 billion acquisition of UK competitor Just Eat. Twelve months on, investors are still sceptical about the enlarged group, which now has a market value of $19 billion.

Just Eat Takeaway expects combined sales to reach $7 billion by 2023, according to projections it shared with investors in May. That’s more than the $6.4 billion that analysts expect U.S. rival DoorDash (DASH.N) will generate in the same year, according to estimates compiled by Refinitiv. But Just Eat Takeaway’s enterprise value is less than 3 times its expected revenue; the $52 billion DoorDash trades on more than 7 times, after deducting net cash of about $4.5 billion. The Dutch company says growth during the pandemic means its numbers will be higher, implying an even bigger valuation gap.

That’s partly because Groen is the underdog in America. DoorDash handled more than half of all meal deliveries in the United States as of the last week of April, according to Edison Trends; Grubhub’s market share was 13%. Some U.S. cities have imposed temporary caps on the fees food delivery groups can charge restaurants, making it harder for smaller players to win business by cutting fees.

Like Just Eat Takeaway, Grubhub started out connecting restaurants to diners online, but not handling deliveries. Rivals Uber Eats and DoorDash have gained market share – and burned lots of cash – by hiring their own fleets of drivers. In Europe, Groen has straddled the two business models. The company spent over 700 million euros on drivers in 2020, winning partnerships with chains like McDonald’s (MCD.N) and Starbucks (SBUX.O). Just Eat Takeaway’s UK revenue grew 42% last year while in Germany its adjusted EBITDA increased sixfold to 125 million euros.

Groen now hopes to repeat that trick in the United States. Yet he has a full plate. Uber Eats and Delivery Hero (DHER.DE) are challenging Just Eat Takeaway in Germany, while a fleet of heavily funded startups promising rapid grocery deliveries pose another potential threat. No wonder Just Eat Takeaway investors are worried about indigestion.

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- Just Eat Takeaway.com on June 15 completed its acquisition of U.S.-based Grubhub. The enlarged food delivery company now operates in 24 countries including the United States, the United Kingdom, the Netherlands and Germany.

- The combined group processed 816 million orders in 2020, made 4 billion euros of revenue and earned adjusted EBITDA of 352 million euros.

- Shares of Just Eat Takeaway were trading at 75 euros by 1330 GMT on June 16.

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