Shares Of Just Eat Plc Zoom Over 27% Amid Possible All-Share Merger With Takeaway.com

In a major development announced by the Just Eat Plc as on July 29, 2019, Just Eat Plc’s board of directors and Management Board of Tekeaway.com have confirmed that both the company have reached an agreement where they will exercise a possible all-share combination of both to create a new entity by the name “Just Eat Takeaway.com N.V” and the new entity would be headquartered in Amsterdam, the Netherlands. Its shares will be listed on the London Stock Exchange.

Takeaway.com supervisory board has already approved the principal key terms for an all-share combination. The joint move taken by both of these online food delivery company is all set to create one of large online food delivery company in the world backed with industry-leading capabilities, attractive market share in the concerned geographies, strategic vision and a diversified geographical footprint.

The new combination will add value to both the companies and provide opportunities to create a larger individual platform; “Just Eat Takeaway.com”. The proposed combination of these two online food deliveries carrying the potential to benefit their respective stakeholder, i.e., shareholders, customers, employees and others.

Just Eat Plc – Business Overview

Just Eat PLC is a United Kingdom-headquartered high-tech company, which operates as a leading global hybrid marketplace for online food delivery. With brands across 13 countries, the international footprint of the company helps it in generating a diversified revenue base. The company operates through two subsidiaries, namely, Just Eat Holding Limited and Just Eat Central Holdings Limited and has around 100,000 restaurant partners connected to approximately 24 million active customers. The company’s operations are differentiated in four geographical segments: United Kingdom, Canada, Australia & New Zealand and International.

Proposed Combination’s Key Takeaways

Post completion of the proposed all-share combination between Just Eat Plc and Takeaway.com, the shareholders of the Just Eat Plc will control approximately 52.2% stake in the new entity “Just Eat Takeaway.com N.V”, whereas Takeaway.com’s shareholders will hold 47.8% (excluding dilution from any conversion of Takeaway.com’s convertible bonds) the new company.

Based on the closing price of Takeaway.com shares as on July 26, 2019, of €83.55, they imply a value for Just Eat Plc of 731pence per share. The implied value is representing a 15% price premium on the Just Eat Plc’s closing price as on July 26, 2019.

Post-exercise of the proposed combination, the present Chairman of the Just Eat Plc, Mike Evans will take charge as the Chairman of the Supervisory board of the new entity and present Chairman of the Takeaway.com, Adriaan Nuhn will assume as the vice-chairman of the combined entity.

The present Chief Executive Officer of the Takeaway.com will take charge as the CEO of the Just Eat Takeaway.com N.V post completion of the proposed merger. Paul Harrison, the present CFO of the Just Eat Plc, will assume the charge as CFO of the new combined entity. The present COO of the Takeaway.com- Jorg Gerbig will assume the office of the new combined entity as the COO, subject to completion of the proposed merger.

Following completion of the proposed all-share combination, it is decided that Takeaway.com will retain its two-tier board structure, which would comprise of Supervisory board of seven members, including three members nominated by Just Eat Plc including Mike Evans and Adriaan Nugn and two members nominated by Takeaway.com board and Management board of four members including three existing members of the Takeaway.com.

Post completion of the proposed transaction, the new entity’s shares would be listed on the London Stock Bourse and the new entity will maintain a substantial part of its operation in the United Kingdom.

High Compelling Opportunities

The proposed combination would create one of the world’s largest online food delivery entity, with 360m orders at €7.3bn in 2018. The combined entity will have a collective 40 years of joint experience led by dedicated promoters led management team.

Just Eat Takeaway.com N.V will control substantial market share position in the online food delivery arena in the many of the world’s largest geographies, comprising the United Kingdom, Netherlands, Germany and Canada. And the combined entity will have adequate sources and funds to stipulate its competitive position in the online food delivery market.

The combined entity would have increased opportunities to leverage investments, primarily in technology, marketing and restaurant delivery services.

The proposed new entity would have humungous opportunities to expand its reach in Canada, Latin America and Australia. Meanwhile, Takaway.com holds significant market share in Germany and Eastern Europe.

The online food delivery market in Europe has witnessed a huge amount of investments in the past couple of months ranging from Takeaway.com’s agreeing to the acquisition of the ‘Delivery Hero,’ a Germany based online food delivery business for a consideration of €930m, followed by Amazon’s takeover of Deliveroo in May last year for a consideration of €575m.

In a statement, Alex Captain, the founder and managing partner of Car Rock’s commented that “the proposed an all-share combination of Just Eat and Takeaway.com would provide substantial scope for Just Eat to secure market share position against the Uber, Deliveroo and others.”

The proposed combination would create a £9bn online food ordering company, and it is carrying the high potential posing risks to the younger peers like Uber Eats, Deliveroo-backed by Amazon and others.

Just Eat Plc: Q1FY19 highlights

During the quarter under consideration, the group’s revenue recorded a growth of 28% on a like-for-like basis and stood at £227.9m, largely driven by 21% growth in the group’s orders on a like-for-like basis. Led by the group’s continued marketplace leverage and increased the pace of delivery initiatives, orders recorded a growth of 21% on a YoY basis and stood at 61.4m.

Meanwhile, UK orders during the quarter under review recorded a growth of 7.4% and quoting at 31.9 million. The growth during the Q1 was impacted by several reasons with fall of Ester in Q2 and unexpected hot weather in February 2019, are two major ones. However, the company is bullish on its performance in the second quarter of FY19 and is expecting decent improvement in the order in the remaining months of 2019.

However, the company’s performance outside the UK was decent, with 40% growth in the orders, driven by decent growth in Canada, Italy, Switzerland and Ireland.

The company in the statement provided revenue guidance for FY19 to be in the range of £1.0bn to £1.1bn, and they are expecting uEBITDA for the full year would be in the range of £185m to £205m (excluding Brazil and Mexico).

The company has proven track record of delivering EBITDA margin above 20% over the past several years, and this is substantially above the industry median, which indicates operational efficiency of the company and the competitive advantage lying with them.

 

Just Eat Plc shares skyrockets

Post formal announcement made by the company as on July 29, 2019, shares of LSE: JE has leapt up substantially in day’s session.

 Daily price chart (as on July 29, 2019), before the market close. (Source: Thomson Reuters)

At the time of writing (before the market close, at 01:49 PM GMT), shares of the JE have surged approximately 175 points or 27.53% against the previous closing price of GBX 635.6 and quoting at GBX 810.6. The day’s percentage change in the stock price against the previous close is the biggest one since its shares got listed as on April-08-2014 on the main market of the London Stock Exchange. Since its listing in April 2014, shares of the Just Eat Plc have delivered a CAGR price return of approximately 31%, which itself shows the company’s strength. At the current trading level, the stock was up by approximately 37% on a YTD basis and approximately 4% up on a YoY basis.

52w H/L range

In the year-ago period, shares of the company have registered a 52w high of GBX 867.40 and a 52w low of GBX 519.20, and at the current trading level, shares were quoting approximately 56% above its 52w low price level and around 7% below the 52w high price level.

Simple Moving Average (SMA) standpoint,

From the simple moving average standpoint, the stock is trading considerably above its 5-day, 20-day, 60-day and 200-day simple moving average prices.

Volume Summary

The day’s traded volume in Just Eat shares stood at 9,079,761 (before the market close), which is approximately 5.8 times of the 5-day average daily volume and approximately 4.2 times of the daily average volume in stock traded at the London Stock Exchange.

The bottom line is that the proposed combination between Just Eat Plc and Takeaway.co is carrying substantial opportunities to add value for all their respective stakeholder and on the same time could pose substantial competition for their rivals like Uber Eats and Deliveroo-backed by Amazon.