Just Eat Takeaway: iFood sale will whet appetite for Grubhub disposal

Just Eat Takeaway argues delivery is the thing it does best. Shareholders in the online meal delivery group may disagree. They have stomached losses of almost 80 per cent over the past year. Better victuals arrived on Friday, when Just Eat said it would sell its one-third stake in Brazilian venture iFood for up to €1.8bn.

Tech investors once thought online meal delivery companies had a brilliantly disruptive business model. Harsh reality has shown that costs are high, barriers to entry are low and markets are localised.

As a consolidator, Netherlands-based Just Eat hoped to remedy these flaws with economies of scale. Investors, like any homebody kept waiting for hours for a pizza, have been getting impatient with the lossmaking group.

Tech conglomerate Prosus will pay €1.5bn in cash and up to €300mn for iFood shares it does not already own. A multiple of 0.5 times enterprise value to next year’s gross transaction value is more than twice Just Eat’s valuation, thinks Numis. Just Eat shares jumped almost two-fifths.

This appetiser will keep shareholders satisfied for now. They will soon get hungry for the main course, the sale of Grubhub. Just Eat bought its US rival for $7.3bn in shares in 2021. In April, it said the unit was for sale. Earlier this month, it wrote down Grubhub’s value by €3bn.

Just Eat leads the market for food delivery in the UK, Germany, Italy and Canada. But orders in North America were down a tenth in the first half of this year. US rival DoorDash continues to grow at strong double digits. Rising inflation is squeezing consumer wallets and increasing debt costs.

About €550mn of debt payments fall due at the start of 2024. Pressure from that liquidity crunch has diminished. The iFood sale boosts cash on hand to €2.3bn. That is enough for almost two years at the most recent six-month burn rate of €450mn, even after debt repayments.

A Grubhub deal comes next. But most investors who tapped their feet to TV ads fronted by rapper-for-hire Snoop Dogg tuned out long ago.

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