Just Eat Takeaway weighs Grubhub sale as pandemic boost fades

Investors reappraise valuations for loss-making technology companies and stocks seen as big beneficiaries of the pandemic.

Europe's biggest meal delivery company Just Eat Takeaway is looking at selling US arm Grubhub less than a year after buying it, under pressure from investors to revive its shares amid stiff competition and a fading pandemic boost.

In an abrupt turnaround, CEO Jitse Groen said Takeaway had hired banks to explore a possible sale of Grubhub - alongside potential partnership options it was already exploring - and that buyers had expressed more than casual interest.

"We are in talks with people around this (a sale), but I need to caution that doesn't automatically lead to a transaction," Groen told reporters.

Takeaway, which paid $7.3bn (€6.72bn) for Grubhub in 2021 while racking up a billion euro loss, has been hit as investors reappraise valuations for loss-making technology companies and stocks seen as big beneficiaries of the pandemic.

The company's shares, which have lost two-thirds of their value since an October 2020 peak above €100, rose strongly in trading yesterday on the back of the news. At current levels, Takeaway's market value of €5.3bn is less than it paid for Grubhub.

Investor sentiment towards online food companies has soured amid expectations that some customers who switched to home deliveries during the pandemic will return to restaurants.

In a trading update, Takeaway said orders had fallen 1% in the first quarter and it now expected "mid-single-digit growth" in Gross Transaction Value (GTV) this year, instead of the "mid-teens" predicted in January. GTV measures the total value of food ordered and delivered.

The downgrade to Takeaway's outlook follows a warning by British rival Deliveroo last week that consumer spending could slow this year amid a cost-of-living squeeze. 

Takeaway and Deliveroo have been striking deals with supermarkets to add on-demand grocery delivery to their offerings to try to stave off competition from "fast grocery" startups such as Gorillas of Germany and Getir of Turkey.

Groen said his operational focus would be on growing average order sizes and cutting costs. "We expect profitability to gradually improve throughout the year, and to return to positive adjusted EBITDA (core earnings) in 2023," he said.

Grubhub has strong positions in East Coast cities in the US, notably New York, but its profitability was hit by caps on the commissions it is able to charge restaurants in the pandemic.

Takeaway is challenging the legality of the fee caps, which it says are costing the company around €200m annually in lost operating profit. In a note, Barclays analysts said Takeaway looked undervalued on a "sum of the parts" basis.

"There are still potential catalysts to unlock this with the process on Grubhub ongoing, a sale of (Takeaway's stake in Brazilian business) iFood possible, legal cases around fee caps ongoing in the US, and the AGM upcoming."

Reuters