October 22, 2019 / 1:37 PM / 7 months ago

Breakingviews - Naspers spinoff wades into UK food delivery fight

Signage for Just Eat is seen next to Uber Eats and Deliveroo advertisements on the window of a restaurant in London, Britain, August 5, 2019.

LONDON (Reuters Breakingviews) - Britain’s food delivery fight keeps attracting new diners. Even as investors lose their appetite for cash-burning startups, newly-listed Prosus has waded into the bidding for Just Eat, slapping down a 4.9 billion pound order for the UK group. That doesn’t necessarily mean it’s a healthy meal.

The hostile bid by the Amsterdam-listed company, which was spun off by South Africa’s Naspers earlier this year, is an attempt to muscle aside an agreed all-share offer from Dutch group Takeaway.com. That deal has wilted in recent months as the buyer’s share price declined. At the close of trading on Monday it valued each Just Eat share at 595 pence, well below the 710 pence cash offer from Prosus.

Despite the valuation gap, Just Eat’s board rejected the Prosus offer, arguing that it “significantly undervalues” the company. Investors appear to agree. Just Eat shares were trading at 744 pence by lunchtime on Tuesday, implying hopes for a bidding war. Hedge fund Cat Rock Capital, which owns around 3% of the company, optimistically declared Prosus should pay at least 5 times Just Eat’s expected revenue for 2020, implying an offer worth 925 pence.

It’s doubtful Takeaway.com has the stomach for a fight. The company founded by Jitse Groen is already giving Just Eat shareholders more than half of the combined group and has limited scope to add any cash to the bid.

Prosus CEO Bob van Dijk, meanwhile, seems ready to run up a big tab. His company’s 108 billion euro market value largely rests on its stake in Chinese internet giant Tencent. Nevertheless, it had net cash of almost $6 billion on its balance sheet at the end of June. Van Dijk on Tuesday promised a substantial amount of extra investment to help fund Just Eat’s push to recruiting its own delivery drivers.

That’s necessary because Just Eat is losing market share. On Monday the company announced growth in UK food orders had slowed to 8% in the most recent quarter, as consumers switched to deliveries from fast-food chains.

Prosus already owns stakes in Germany’s Delivery Hero and Brazil’s iFood, whose investors include Just Eat. Crashing into the UK means more competition for Uber Eats and Deliveroo. The latter recently agreed an investment from Amazon, which is facing regulatory scrutiny. That’s good news for diners keen to order food from their sofas, but makes for less wholesome returns.


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