© Reuters. FILE PHOTO: A Just Eat delivery man rides his bicycle in Nice amid the coronavirus disease (COVID-19) outbreak in France, February 16, 2021. REUTERS/Eric Gaillard
By Toby Sterling
AMSTERDAM (Reuters) -Europe’s biggest meal delivery company Just Eat Takeaway.com is looking at selling U.S. arm Grubhub less than a year after buying it, under pressure from investors to revive its shares amid stiff competition and a fading pandemic boost.
In an abrupt turnaround, CEO Jitse Groen said Takeaway had hired banks to explore a possible sale of Grubhub – alongside potential partnership options it was already exploring – and that buyers had expressed more than casual interest.
“We are in talks with people around this (a sale), but I need to caution that doesn’t automatically lead to a transaction,” Groen told reporters.
Takeaway, which paid $7.3 billion for Grubhub in 2021 while racking up a billion-euro loss, has been hit as investors reappraise valuations for loss-making technology companies and stocks seen as big beneficiaries of the pandemic.
Its shares, which have lost two-thirds of their value since an October 2020 peak above 100 euros, were up 2.5% to 26.75 euros at 0800 GMT, but remain not far above their 2016 IPO price of 23 euros.
Investor sentiment towards online food companies has soured since the Grubhub deal closed in June amid expectation that some customers who switched to home deliveries during the pandemic will return to restaurants.
In a trading update, Takeaway said orders had fallen by 1% in the first quarter and that it now expected “mid-single digit growth” in Gross Transaction Value (GTV) this year, instead of the “mid teens” predicted in January.
GTV measures the total value of food ordered and delivered.
Takeaway handled 264.1 million orders in the first quarter, compared with an estimate of 286 million by JPMorgan (NYSE:JPM) analysts.
The downgrade to Takeaway’s outlook follows a warning by British rival Deliveroo last week that consumer spending could slow this year amid a cost-of-living squeeze.
Groen said his operational focus would be on growing average order sizes and cutting costs. “We expect profitability to gradually improve throughout the year, and to return to positive adjusted EBITDA (core earnings) in 2023,” he said.
Major shareholders including Cat Rock, the company’s second-largest with a 6.88% stake, criticised the purchase of Grubhub and have called on Groen to sell it.
Grubhub has a strong positions in East Coast cities, notably New York, but its profitability was hit by caps on the commissions it is able to charge restaurants in the pandemic.
Takeaway is challenging the legality of the caps, which it says are costing the company around 200 million euros annually in lost operating profit.
Last week, hedge fund Lucerne Capital Management, which did not disclose the size of its stake in Takeaway, said it would vote against the reappointment of the company’s finance chief at its shareholder meeting in May to protest over alleged poor communication and the weak share performance.
Just Eat Takeaway weighs Grubhub sale as pandemic boost fades