Talks with Uber fell through after antitrust concerns.
June 11, 2020
In the wake of negotiations breaking down with Uber, Grubhub will merge with Just Eat Takeaway, a third-party delivery provider based in Europe, for an estimated $7.3 billion.
The combined company will become the world’s largest online food delivery company outside China, with service in more than 25 countries. Grubhub and Just Eat combined for $3 billion in revenue in 2019, with about 593 million orders and more than 70 million active customers globally.
Under the terms, Grubhub shareholders would receive American depositary receipts (ADRs) representing 0.6710 Just Eat shares in exchange for each Grubhub share, which have an implied value of $75.15 per share. Grubhub shareholders are expected to own 30 percent of the new company.
Grubhub CEO Matt Maloney will join Just Eat’s board and will lead business across North America, while Just Eat CEO Jitse Groen will be the CEO of the merged company.
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“Combining the companies that started it all will mean that two trailblazing start-ups have become a clear global leader,” Maloney said in a statement. “We share a focus on a hybrid model that places extra value on volume at independent restaurants, driving profitable growth. Supported by Just Eat Takeaway.com, we intend to accelerate our mission to be the fastest, best and most rewarding way to order food from your favorite local restaurants in North America and around the world. We could not be more excited.”
The merger, contingent upon the approval of Just Eat’s and Grubhub’s shareholders, is expected to be finalized in the first quarter of 2021.
The company will be headquartered in Amsterdam, with North American headquarters in Chicago and a significant presence in the U.K.
“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 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. I am excited that we can create the world’s largest food delivery business outside China. We look forward to welcoming Matt and his team to our company and working with them in the future.”
According to CNBC, discussions centered around Uber acquiring Grubhub cooled in recent weeks because of concerns over antitrust law. CNBC reporter David Faber said Uber and Grubhub agreed to a stock ratio of 1.925 Uber shares per share of Grubhub, but the two sides couldn’t agree on how to navigate the regulatory challenges.
“Like ridesharing, the food delivery industry will need consolidation in order to reach its full potential for consumers and restaurants,” Uber said in a statement. “That doesn’t mean we are interested in doing any deal, at any price, with any player.”
A host of Democratic congressmen co-signed a letter to antitrust officials in May warning them of anticompetitive effects and urging them to monitor the situation closely and investigate an Uber/Grubhub merger if it occurred.
“I have repeatedly raised concerns and advocated against a potential merger between Uber and GrubHub,” Minnesota Sen. Amy Klobuchar said in a statement. “During this pandemic, when millions are out of work and many small businesses are struggling to stay afloat, our country does not need another merger that could squelch competition. News that the Uber/Grubhub deal may not materialize would be good for both consumers and restaurants.”
Data from analytics firm Edison Trends showed that in April, DoorDash commanded 47 percent of the food delivery market while Grubhub controlled 23 percent and Uber Eats represented 26 percent. Second Measure had DoorDash at 44 percent of sales in April, followed by Grubhub at 23 percent, and Uber Eats at 22 percent. Using either metric, an Uber and Grubhub merger would result in two brands-DoorDash and Uber/Grubhub-commanding roughly 90 percent or more of the market.
Just Eat, the result of an $11.1 billion merger between U.K.-based Just Eat and Netherlands-based Takeaway.com earlier in 2020, serves more than 155,000 restaurants across the U.K, Australia and New Zealand, Canada, Denmark, France, Italy, Ireland, Norway, Spain, and Switzerland, and more.
With numerous brands shifting to an off-premises only model, third-party delivery providers have had a contentious relationship with restaurant operators amid the pandemic because of fees that sometimes reach 30 percent to 40 percent. Several cities have instituted emergency caps, such as San Francisco, Los Angeles, New York City, Seattle, and Washington, D.C.
Grubhub garnered much criticism in March when it announced that it was suspending collection of up to $100 million in commission payments from independent restaurants. However, it was later clarified that these payments would be deferred and that restaurants would have to pay them in the future.
“Assuming Just Eat did its due diligence, they know they paid billions for Grubhub’s horrible reputation among restaurant owners in New York City and around the nation,” said Andrew Rigie, executive director of the NYC Hospitality Alliance, in a statement. “Grubhub’s new corporate owners now have a responsibility to change the company’s predatory practices and improve relationships with restaurants.”