(Bloomberg)—Europe’s Just Eat Takeaway.com NV agreed to acquire U.S.-based Grubhub Inc. for $7.3 billion, in a deal that creates one of the world’s largest meal-delivery companies as the coronavirus pandemic drives a surge in orders.
Amsterdam-based Just Eat Takeaway said it will pay $75.15 per share for Grubhub in an all-stock deal with an equity value of $7.3 billion. Grubhub’s stock price rose about 6 percent in extended trading to more than $62, while the European company fell about 13 percent.
The deal ends Grubhub's 16-year run as an independent company, which pioneered online food-ordering and delivery. CEO Matt Maloney founded the company in 2004 alongside Mike Evans, a fellow coder at Apartments.com, and Grubhub became one of Chicago's few public technology companies.
As the business moved from online ordering to delivery, Grubhub found itself in fierce competition with Uber, a ride-hailing company, and upstarts DoorDash and Postmates. With venture capitalists willing to fund its rivals’ deep discounts and lose money to gain market share, Grubhub found itself struggling to maintain growth and profits its shareholders had come to expect.
Grubhub will launch Just Eat Takeaway into the U.S. market, broadening its already-global reach that includes Australia, Brazil and Canada, in addition to its home base in Europe. Jitse Groen, the Dutch billionaire who created Takeaway in 2000 in his university dorm room, has been looking to expand aggressively over the last year. Less than two months ago, Takeaway received antitrust clearance from the U.K. for its $8 billion acquisition of Just Eat.
The deal also sidelines Uber Technologies Inc., which had been in acquisition talks with Grubhub for at least a month. Political pressure raised questions about whether U.S. regulators would approve such a deal. The two companies had nearly aligned on a price but remained at odds over other issues, including terms of a breakup fee for Grubhub if the deal couldn’t be completed, people familiar with the matter said last month.
Even as the pandemic has led to a surge in demand for food delivery as people spend more time at home, the industry has been defined by fierce competition. Profit margins are tight or nonexistent due to the stiff competition to sign the most popular restaurants and add customers. Gross food sales for Grubhub rose 8 percent to $1.6 billion in the first quarter, and the company reported a net loss of about $33 million. Uber’s gross bookings for food delivery increased 52 percent to $4.68 billion in the same period, but the division’s loss also rose.
Analysts have long said the unprofitable model in food delivery is unsustainable and expected consolidation. For Uber, losing the deal is a blow to the company’s plan to increase revenue and eventually turn a profit from food delivery. That strategy was especially urgent with the pandemic lifting food delivery while decimating Uber’s main business of ride hailing. The company has cut jobs and side businesses as a result. It was relying on deals to achieve a top position in the markets where it operates.
In an emailed statement, a spokesman for Uber said the company believes the industry needs consolidation but that it’s not interested in “doing any deal, at any price, with any player.”
Tensions between management of Uber and Grubhub were boiling over in recent weeks, a person familiar with the discussions said. Among the points of contention: the roles for Maloney and other Grubhub executives at Uber and the fate of a Washington charm offensive to win over regulators that was expected to take a year and a half, said the person, who asked not to be identified because the discussions were private.
Just Eat Takeaway said Maloney will join the board and run the North America business. “Matt and I are the two remaining food delivery veterans in the sector, having started our respective businesses at the turn of the century, albeit on two different continents,” Groen, the Just Eat Takeaway founder, said in a statement. “Both of us have a firm belief that only businesses with high-quality and profitable growth will sustain in our sector.”
Crain's reporter John Pletz contributed.
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