ROCKVILLE, Md., June 11, 2020 /PRNewswire/ -- On June 10, Just Eat Takeaway (Amsterdam, Netherlands) announced that it had entered into an all-stock agreement to purchase Grubhub. In May, Uber Technologies (San Francisco, CA) was in negotiations to acquire Grubhub (Chicago, IL). This deal, if completed, would have combined two of the largest online foodservice delivery firms in the US. However, negotiations fell through due to disagreements over price and the likelihood of antitrust scrutiny.
The deal with Just Eat Takeaway represents an implied value of $75.15 per Grubhub share, much higher than the $62.50 per share offered by Uber. Additionally, the foreign company's acquisition of Grubhub is unlikely to face the same regulatory hurdles that the Uber-Grubhub deal would have encountered.
Just Eat Takeaway was itself only recently created as the result of combining Just Eat (United Kingdom) and Takeaway.com (Netherlands) in a deal that was finalized in April 2020. The two firms had been concentrating on supplying software to restaurants interested in running their own delivery operation and when combined had only just begun building out its own delivery capabilities.
According to Packaged Facts analyst Cara Rasch, "This deal will allow the European Just Eat Takeaway to gain a larger footprint in North America, while it will also help to diversify Grubhub's business. Skip the Dishes, a subsidiary of Just Eat Takeaway, does a lot of business in Canada and could help the Grubhub brand expand more broadly through North America."
She notes, "Growth prospects for food carryout and delivery were strong even before the coronavirus outbreak, but the outlook is even brighter for these applications following mandated social distancing guidelines that have shuttered dine-in service or forced restaurants to greatly limit their dine-in capacity."
Rasch adds, "In the short-term, third-party restaurant delivery apps have a number of advantages over in-house delivery. They are convenient for consumers because they allow customers to order from a variety of venues using one application. They also can allow smaller businesses without the capital to invest in in-house development of effective online apps to expand their delivery services quickly in the wake of COVID-19, which has forced fast changes."
However, Cara Rasch states, "Some restaurants consider the commissions that third-party online delivery companies charge to be a burden. If they don't raise their prices for meals ordered via a third-party app, they are in danger of losing money in an already tight-margin business that has been threatened by lower overall restaurant sales during the pandemic."
Additionally, she explains, "In the longer-term, many restaurants are going to see the value of investing in an in-house system for delivery orders. Using a third-party company for ordering and delivery makes it harder for restaurants to develop a direct relationship with consumers. It is also challenging to ensure food quality since restaurants have no control over the food once it leaves the restaurant."
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