Just Eat Takeaway could lose billions on Grubhub sale

Just Eat Takeaway is having a fire sale, and it could get burned in the process.

According to a report from the UK’s Sunday Times, the multinational food giant has slashed its asking price for Grubhub, which it acquired less than a year ago for $7.3 billion, by nearly $6 billion as it looks to attract a buyer. Just Eat Takeaway (OCTUS: JTKWY) has been considering selling the third-party food delivery app since April.

Multiple unnamed sources told The Times that Grubhub could sell for as little as $1.26 billion, but even that may not be enough to get the platform off its books. Bank of America has been working with Just Eat Takeaway to find a buyer, but there’s a chance that none will be found, sources said.

“I’d be amazed if this does get done now because I don’t know how management can credibly stand up and go, ‘You know, we’ve paid billions of dollars for this asset and now we’re going to take a massive bath on it,’” one source told The Times.

Just Eat Takeaway declined Modern Shipper’s request for comment.

Read: Honeymoon’s over: Just Eat Takeaway considers selling Grubhub

Read: Grubhub sees strong revenue growth, but reports surprising quarterly loss

In the months following the Grubhub acquisition, investors have sourced on Just Eat Takeaway’s stock. Shares of the Dutch food and delivery company hovered around $4.50 in May after trading closer to $18 last June. That’s about a 75% decline year-over-year.

In addition to those market signals, shareholders have also voiced their concerns about the deal. Since late last year, activist investor Cat Rock Capital Management, which holds 6.5% of outstanding shares, has been urging top brass to sell Grubhub and focus on the European market, where Just Eat Takeaway has built up a core customer base over the years.

“JET [Just Eat Takeaway] management made a capital allocation mistake when it decided to buy Grubhub in June 2020 with minimal synergies only two months after tripling the company’s size with the Just Eat acquisition,” the firm said publicly last month, referring to the merger between Just Eat and Takeaway in 2019.

Cat Rock and other investors attacked the deal early on, saying that Grubhub was losing the US food delivery battle to DoorDash and Uber Eats. The data bears that out — according to market research firm YipitData, Grubhub in Q4 2021 had the smallest market share out of the three food delivery apps at only 10%, compared to 32% for Uber Eats and 58% for DoorDash.

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Earnings data from Just Eat Takeaway also poses questions about Grubhub’s position in the US market. The company had seen an uptick in North American orders during the pandemic, but orders declined 5% year-over-year in the first quarter of 2022 as customers began to return to old habits.

Adding to the pressure for Just Eat Takeaway is a sell-off of technology stocks more generally. The Invesco QQQ ETF, a composite of the Nasdaq-100 Index, is down nearly 25% in 2022. That’s in part due to factors like rising inflation and worse-than-expected Q1 earnings for tech companies.

The bearish market has forced the hand of a pair of European food delivery startups with operations in the US, Gorillas and Getir, both of which reported significant layoffs last week. Reports suggest that Philadelphia-based Gopuff also planned layoffs in March, and it could now be shuttering up to 22 warehouses, sources familiar with the matter told Insider last week.

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