Takeaway and Just Eat to merge in $10B deal to take on Deliveroo and Uber Eats in Europe

The food delivery wars in Europe remain hotter than a vindaloo, and that’s leading to some major consolidation: today Just Eat and Takeaway.com, two of the bigger take-out and delivery businesses in the region, announced that they are in the “advanced stages” of a merger. The deal would help them combine forces and take on more scale to compete better with Uber Eats and Amazon-backed Deliveroo.

Both companies are currently publicly listed, Just Eat in London and Takeaway.com in Amsterdam, each with a market cap of around $5 billion.

The combined entity would have an estimated market value of more than €10 billion, or $10 billion — although the share prices are moving quickly right now — and the companies say it would make world’s largest online food delivery platforms, which processed 360 million orders worth €7.3 billion ($8 bilion) in 2018.

Under merger rules in the UK, there is a time limit on how long the two can sit on this deal. They now have until August 24 to get final approval from investors to get the deal squared away.

The companies say the two boards have already agreed on the specific terms, which are as follows:

— Jitse Groen, currently CEO of Takeaway.com, would become CEO of the merged company. Paul Harrison, currently CFO of Just Eat, would become the CFO. Brent Wissink, currently CFO of Takeaway.com, and Jörg Gerbig, currently COO of Takeaway.com, would become co-COOs of the Combined Group.

— The company combined would be headquartered in Amsterdam, but “with a premium listing on the London Stock Exchange” and a “significant part” of its operations in the United Kingdom, which is Just Eat’s home market.

— Just Eat shareholders would get 0.09744 Takeaway.com shares in exchange for each Just Eat share.

— Just Eat shareholders would own approximately 52.2% of the business; Takeaway.com shareholders would own approximately 47.8% (based on the fully diluted ordinary issued share capital of Takeaway.com but excluding dilution from any conversion of Takeaway.com’s convertible bonds, and the fully diluted share capital of Just Eat, in each case, as at the date of this announcement).

— These terms imply a value for Just Eat of 731 pence per share based on Takeaway.com’s closing share price on 26 July 2019 of €83.55, a premium of 15% to Just Eat’s closing share price on Friday.

— Mike Evans, who is the Chairman of Just Eat, would become the Chairman of the Supervisory Board of the Combined Group. Adriaan Nühn, currently Chairman of the Takeaway.com Supervisory Board, will assume the role of Vice-Chairman of the Supervisory Board of the Combined Group.

Takeaway.com — which went public in 2016 — is no stranger to snapping up once-rivals in a bid to expand its business against increasing competition from Uber Eats and Deliveroo. Last year, it paid $1.1 billion to buy Delivery Hero’s German operations, as the latter (ironically based in Berlin) continued to turn its attention to operations in developing markets.

Economies of scale are a critical part of making the financials of delivery and other transportation and e-commerce services work better. You can develop more efficient routes and plot drivers more closely to pick-ups and drop-offs. In the case of food services, this is especially important considering the freshness of the passenger.

There are other areas where it also makes more sense, such as in terms of the investments that a delivery company will make in building better back-end systems to operate the services: having a wider network of restaurants and drivers tapping into those investments makes the payoff faster.

Indeed, the fact that the CEO of Just Eat would become the CFO underscores some of the clear financial reasons for the deal.