Just Eat Takeaway shares rallied this week on news it was finally offloading US delivery service Grubhub for $650m.
The group acquired the business for more than $7bn in 2021 but has been exploring a sale for over two years amid market perceptions that Grubhub was a drag on its valuation.
That perception seems to have been correct with the announcement causing a 25% jump in its share price as the Grocer went to press, reinstating lost value after its third quarter results last month triggered a major sell off.
“The market is clearly pleased…both for the injection of cash it will provide and for the increased focus it could bring to the group,” said Russ Mould, investment director at AJ Bell.
The sale to delivery-focused restaurant chain Wonder marks a big financial loss for Just Eat but reflects Grubhub’s diminished status since 2021 as it lost market share to rivals like Uber Eats and suffered from New York’s stringent fee caps on delivery apps.
“The whole Grubhub debacle will inevitably leave some scars but investors seem prepared to focus on the future and the promised boost to cash generation and growth for the remainder of the group,” Mould added.
The deal is expected to close in Q1 next year and should deliver net revenues of $50m for Just Eat.
“The €650m in consideration will bring the balance sheet into a net cash position, and significant capital return could now be on the table,” said analysts at Panmure Liberum. “If [Just Eat] chooses to return the capital, it could repurchase c25% of its shares.”
Before this week, several investors were doubtful an imminent sale would occur, expecting it would have to wait for a removal of fee caps in New York. This drove concerns that with no clear buyer in place, Grubhub could become a long-term burden on Just Eat’s cash flow.
These fears are finally alleviated. “Although the net proceeds represent only 2% of [Just Eat’s] market cap, the positive sentiment generated by this transaction should drive a substantial re-rating of [its] shares,” said analysts at Deutsche Bank.
No comments yet