A hostile bid for Just Eat (JE.) has sent shares in the food delivery platform up 25 per cent, just a day after management revealed slowing growth in the third quarter of the year.
The offer from investment group Prosus – which holds stakes in rival food delivery platforms Delivery Hero, Ifood and Swiggy – valued the shares at just 710p each, a 19.6 per cent premium to the 593.7p per share value implied by Takeaway.com's bid on 21 October.
“Just Eat’s Q3 trading update demonstrated a significant slowdown in order growth, which highlights the need to accelerate this investment to sustain its competitive advantage”, Prosus said.
Shares in Just Eat had opened down on Monday after the group announced sales growth of 8 per cent in the UK during the three months to September. UK revenues had risen 11.2 per cent in the preceding three month period. Management attributed the slowdown to a “softer consumer spending backdrop and changing consumer preferences”, but broker Peel Hunt pointed to the growth of well-funded rivals such as Deliveroo and Uber Eats.
Just Eat’s management put out a statement rejecting Prosus’s offer shortly after it was made, stating that it "significantly undervalues Just Eat and its attractive assets and prospects both on a standalone basis and as part of the proposed recommended all-share combination with Takeaway.com".
In response to the rival bid, Takeaway.com founder and chief executive Jitse Groen emphasised the "40 years of combined experience" on offer from a tie-up between itself and Just Eat. "It is only companies like Just Eat and, indeed, Takeaway.com, that achieve material profits in their bigger markets, and our merger needs to be seen in that context," he said.
The group is proposing 0.09744 new shares in exchange for each Just Eat share for the combination. When the offer was first made in August, this implied a value of 731p per share, a considerable premium. However, shares in the Amsterdam-listed group have fallen since the end of August, and it now equates to 594p per share.
Activist investor Cat Rock, which has been advocating for a combination between Just Eat and Takeaway.com, concurred that Prosus’s offer undervalued the group. It argued 710p per share valued the group at 3.8 times 2020 consensus sales, compared with precedents and market multiples of “at least 5 [times]”.
In addition, the investor accused Delivery Hero of interfering with Takeaway.com’s offer, by selling shares in the group on the open market at an upper limit of €73 (£63), prompting a drop in the share price and effectively lowering the value of the bid.
