2016


Takeaway and Delivery Acquisitions

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Just Eat Plc (LSE: JE.), the world´s leading digital marketplace for takeaway food delivery announced in February 2016 that it has agreed on acquiring four businesses from competitors Rocket Internet and Foodpanda for an aggregate of €125Million to be funded from existing cash resources.

The target businesses are online takeaway food companies residing in Spain (La Nevera Roja), Italy (PizzaBo/ hellofood Italy), Mexico (hellofood Mexico) and Brazil (hellofood Brazil). The new acquisition is regarded as highly complementary to Just Eat´s existing portfolio and thus is in line with its strategic growth plan to become the market leader in the geographical environment in which it operates. Studies have estimated that the takeaway food delivery in these targeted territories is worth over € 9.9 billion.

Previous operations in this market, such as the successful consolidation in 2014 of Just Eat in Brazil, demonstrates the effectiveness of M&A transactions in this sector. Through their joint venture with Movile and iFood, they became market leaders in Brazil and processed more than 1.1 million orders in December 2015, a 150% increase year-on-year according to company sources. The benefits include enlarged business volume and scale, with a bigger customer base that would enjoy a larger choice of restaurants, as well as economical synergies established with time that would in turn lead to increased sustainable margins. Just Eat expects the acquisition, in net terms, to adjust 2016 EPS and to add € 6.18 million to 2017 EBITDA.

The other side of the story shows that a trend of divestments has been taking place in the industry: Rocket Internet has sold quickly La Nevera Roja when it had acquired it only one year ago for € 80 million, Just Eat´s CEO David Buttress also sold 60% of his shares in March 2016, so as the finance director Mike Wroe who decreased his ownership by 55%. What seems to be behind the selling trend is mainly the business model of the companies: these start-ups, by providing the independent restaurants a web and online platform to manage their fleet of delivery people, are in fact being related in consumers ‘minds to the quality of food delivered which is mostly low-end fast food. As they don´t handle the food at any point, they charge a low fee of around 10-15% of the order price, and since they are limited in their food choice and price, they cannot optimize the speed and quality of delivery.

 

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