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Honeymoon’s over: Just Eat Takeaway considers selling Grubhub

One year appears to be all that Just Eat Takeaway could handle in the U.S. market. The German delivery company acquired U.S-based Grubhub last summer for $7.3 billion but now it is exploring a potential sale of Grubhub less than a year later.

“The management board confirms its alignment with shareholders in wanting to both create and realize value from the company’s highly attractive portfolio of assets. As such, management is currently, together with its advisers, actively exploring the introduction of a strategic partner into and/or the partial or full sale of Grubhub,” Just Eat Takeaway (OTC: JTKWY) said in a trading update on Wednesday.

Just Eat Takeaway CEO Jitse Groen told analysts on a call the company had hired advisers and launched the sales process, but there was no certainty a deal would be reached.

The update noted that management was focused on increasing revenue per order, improving courier costs per order, and reducing overhead and operational expenses.

Stock takes a hit

Just Eat Takeaway paid $75.15 per share for Grubhub, which represented a 27% premium on the per-share price of Grubhub stock on the day of the initial announcement in June 2020. The deal closed in the first half of 2021. Since then, Just Eat Takeaway’s stock is down about 70%, opening trading at $5.72 on Thursday.

In its 2021 earnings result, Just Eat Takeaway reported an adjusted EBITDA margin of minus 1.2% on revenue of $5.75 billion, up 33% from 2020. The company cited fee caps in the U.S. and Canada as negatively impacting its North American performance. Those caps, it said, resulted in a negative impact of $208 million on adjusted EBIDTA.

Orders in North America increased to 374 million, up 19% from 314 million in 2020 and revenue increased to $2.67 billion, up 17%. In its last quarter (Q1 2021) as an independent company, Grubhub reported $551 million in revenue.

Activist investor pressure

Just Eat Takeaway has been under pressure since late 2021 from activist investor Cat Rock Capital Management. The firm, which holds a 6.5% of outstanding shares, has urged Just Eat Takeaway to sell Grubhub and focus on its core European customer base.

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“As one of Just Eat’s largest and longest-standing shareholders, we shared our view last month that JET should refocus its business on Europe and unlock the significant value of Grubhub through consolidation with a U.S.-focused company,” Alex Captain, founder and managing partner of Cat Rock, said in a Nov. 10, 2021 statement.

 “Since sharing our views last month, we have had productive dialogue with JET management. We agree with the company’s intention to participate in U.S. consolidation and favor timely action that refocuses JET on its enormous European same-day delivery opportunity.

Captain noted the value of same-day delivery in the e-commerce space and noted that Grubhub is “one of only four scaled independent same-day delivery networks in the United States, which gives it significant strategic and intrinsic value.”

Uber’s previous interest

Before Just Eat Takeaway announced its intended acquisition of Grubhub, the U.S. company had been a target of Uber (NYSE: UBER). According to The New York Times, those discussed ran into issues with the overall value and regulatory concerns.

Grubhub holds a roughly 14% market share in the U.S., behind Uber Eats, at 24%, and DoorDash, at 59%, according to Bloomberg Second Measure data as of April 14.

Whether Uber would again be interested is unknown, but CEO Dara Khosrowshahi and Groen had a testy Twitter exchange in April 2021 after Uber announced it would enter the German market.

Groen tweeted at Khosrowshahi: “Interesting way of trying to depress our share price @dkhos. Now, when did I see that before,”.

Khosrowshahi responded: “Advice: pay a little less attention to your short term stock price and more attend to your Tech and Ops.”

Groen replied: “Thank you for the advice, and then if I may: … Start paying taxes, minimum wage and social security premiums before giving a founder advice on how he should run his business.”

Click for more articles by Brian Straight.

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