Breakingviews: Just Eat Takeaway is looking like an M&A leftover

Just Eat Takeaway.com is starting to look like an attractive morsel. The 15 billion euro Dutch food delivery company reported a smaller-than-expected loss on Tuesday. Yet its valuation is depressed, and it faces a tough U.S. market and investment demands in Europe. Chief Executive Jitse Groen doesn’t have many defences if a rival comes knocking.

Groen on Tuesday dished out a relatively good set of results. Just Eat Takeaway reported a loss at the adjusted EBITDA level of 190 million euros in the six months to June, smaller than analysts had expected. Revenue grew by 52% to 2.6 billion euros, after factoring in the acquisition of U.S. rival Grubhub in June.

Yet Groen has longer-term challenges. In the past, Just Eat Takeaway made money by connecting punters to restaurants, relying on eateries to deliver their own food, a stark contrast to operators like DoorDash, which have their own drivers. Groen is now having to invest in delivering food and groceries to catch up. The $7.3 billion acquisition of Grubhub has left him facing a battle in the United States, where he is losing market share to DoorDash and Uber Eats.

Just Eat Takeaway still holds a market-leading position in more than a dozen countries, yet it is trading at an appetising valuation. Groen’s group is valued at around 4 times 2023 gross profit, using Refinitiv data, compared with European competitors Delivery Hero and Deliveroo, which are each trading on an average multiple of over 7 times. Put another way, if the Dutch group’s businesses excluding Britain and the United States were valued on the same multiple as Deliveroo, then its current share price assigns no value to the operations in those two countries, Goldman Sachs analysts reckon.

Small wonder, then, that shareholder Cat Rock Capital wants Groen to consider dealmaking. That’s easier said than done. U.S. giant DoorDash, for example, would struggle to absorb Just Eat Takeaway without raising antitrust concerns. A merger with UK-based Deliveroo would be tricky for the same reason. One potential acquirer is Dutch technology investor Prosus, which has an almost $15 billion war chest.

Groen could try to boost his share price by selling assets and buying back stock. The Brazilian iFood business has been on the shelf for some time, but Groen says he has not yet received a fair offer. If he hangs around, he will face even worse ones.

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