A deal this sizzling needs approval of the UK’s Competition and Markets Authority, who today have brought out desserts and said go ahead!
and the FT version if you have the subscription, https://www.ft.com/content/5d193cd4-9108-4e28-be60-3f309b2ef5d5
Due to the time taken and the ongoing coversations, the mergered closed with Takeaway.com picking up Just Eat for an eye-watering £6bn price tag.
It seems good things come in twos. With Takeaway.com also picking their teeth clean after raising €700m in new financing. This will go towards reducing the debt of the merged firms.
The deal did happen but the two firms could not share resources until fully approved.
Though the deal still went on to close soon after, the CMA had ordered the two companies not to integrate their operations while it probed the deal. It revoked that measure last week.
The end result was, UK customers would not be worse off as Takeaway.com had no UK expansion plans so the number of providers was not shrinking, and increased operational size and support will hopefully bring new innovation.
The delivery sector, food delivery in particular, is a very hot area, with Amazon snacking on some Deliveroo shares.
Both Just Eat and Takeaway.com are available to invest in, however Takeaway.com has the large market cap and data coverage to provide a better analysis, plus they have already changed their name which is handy.
The merger was highly likely to go through so it’s no surprise to see a strong momentum score given they are expected to have some explosive growth (buying another firm often does that.)
Looking beyond that, this is a challenging time for take away service providers. The lockdown means more people are trying to use the service, but less selection, and less drivers is causing a new problem for these firms to overcome. Not to mention the five chilli level of competition in the space.
As Takeaway.com is still in it’s growth phase, buying up competitors, new ventures in new regions, and getting market share in existing nations, they have very low profitability. Offering the service at a price which isn’t sustainable to achieve growth or market share is a common tactic. However, counter to this they are not drowning in debt compared to the cash they bring in, giving them more strength than you’d expect. You’d also be surprised to know they pay dividends, a decent chunk of the cash is paid out to shareholders, counter to what you would expect from a high growth firm.
With the merger expected to be approved, but the joint operations and cashflow not officially on paper, the value is very low making the stock expensive to pickup right now. Not doubt as the new financials come together we’ll see some adjusted positions.
As touched upon, the momentum is extremely high.The future revenue growth is ranked #35 out of #5,495 stocks, and future earnings #104 out of the same total number. While they don’t have the best track record of hitting expectations it seems their is a lot of faith in coming years growth. 75% of analysts have this flagged as a buy, with only 8% saying to sell while it is looking hot.
The take away sectors is a tough nut to crack and no one firm is a clear winner. Will this merger help tip the balance?