Just Eat sells Grubhub at a $6.5bn loss

Just Eat Takeaway has finally sold its American takeaway delivery business Grubhub at a drastic discount to the $7.3 billion it paid for the company in 2020.
Europe’s biggest food delivery group, which bought Grubhub at the height of the pandemic-driven demand for home deliveries, has agreed to sell it for $650 million to New York-based Wonder, a start-up led by former Walmart executive Marc Lore.
The deal, which crystallises a 91 per cent drop in Grubhub’s value, is set to close in the first quarter of 2025 and will allow Just Eat to focus on stronger European markets. After costs, it will be left with net proceeds of “up to” $50 million.
London-listed Just Eat’s dramatic takeover of Grubhub took investors by surprise as the group had previously been in talks with the ride-hailing business Uber. The newly merged unit was described as “the world’s largest food delivery business outside China” but soon struggled against competition from dominant players such as DoorDash and Uber Eats, as restaurants reopened and sales growth slowed.
Just two years after the purchase, Just Eat formally put the business back up for sale amid pressure from activist investors, high taxes and a squeeze from the cap on delivery fees in New York City.
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At the start of the year Jitse Groen, Just Eat’s chief executive, warned that the mergers and acquisitions environment was “very difficult’ in the United States given the lack of activity in the sector.
Groen, 46, said the deal “delivers the right home for Grubhub and its employees.” He added that the sale will increase the cash generation capabilities of the business and accelerate growth.
JP Morgan, which had argued for a valuation of about $1.2 billion for Grubhub in the past, said that the market would view the long-awaited deal as positive even at a lower valuation.
Shares in the Amsterdam-based Just Eat, which have fallen by more that 85 per cent since early 2020, jumped by more than 21 per cent during early dealings on Wednesday before paring some early gains to close up 139p, or 14.7 per cent, at £10.80.
Lore, who founded Wonder in 2018, said: “Wonder’s acquisition of Grubhub continues our mission to make great food more accessible. We’re excited to soon offer a curated selection of Grubhub’s restaurant partners directly in the Wonder app, alongside our owned and operated restaurants and meal kits.”
Analysts at Panmure Liberum said the deal was “unalloyed good news”, adding that the disposal boosted the prospects for Just Eat’s free cashflow generation. Sean Kealy said: “Grubhub was a shrinking business in a growing market that [Just Eat] couldn’t afford to support. Its absence will free up some cashflow for other purposes.”
Silvia Cuneo, an analyst at Deutsche Bank, believes the sale not only “addresses the market’s perception of Grubhub as a drag on Just Eat’s valuation,” but also removed a significant obstacle” in the company’s growth trajectory.
Just Eat, formed four years ago from the merger of Just Eat and Takeaway.com, its Dutch rival, has its headquarters in Amsterdam and operates in countries including Germany, Canada, Australia, France, Spain and Israel. The company reported a net loss after tax of €1.85 billion last year after booking a €1.06 billion impairment against its American business.
It expects its gross transaction value, the total value of all goods sold, to increase by between 2 per cent and 6 per cent in the coming year, although that excludes North America.
In its third quarter, Just Eat said it received a total of 211.1 million orders, fewer than the 214.2 million analysts had forecast. The company’s total gross transaction value, the total value of all goods sold including North America, fell by 3 per cent to €6.34 billion.