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Who hasn’t done too much takeout during the pandemic and is looking to shed the excess weight that resulted? announced the sale. The sale was valued at a modest $650 million, with $500 million in attached debt and just $150 million in cash paid to Just Eat.
Grubhub was acquired during the heat of 2020 at a valuation of $7.3 billion. Just Eat transferred nearly a third of its overall stake in the company as consideration to Grubhub shareholders. Since the day the deal was announced, Just Eat’s share price has fallen by nearly 90 percent, and its current share price is just over 2 billion euros. Pandemic-era miscalculations have proven extremely costly, and investors are showing little remorse in punishing 2020-era profligacy.
Just Eat has created a “quad” strategy. The company has already established food delivery operations in the Netherlands, UK and Germany, with the huge US market as its fourth “profit pool”. However, aside from the boost from the pandemic, economic conditions in the United States were not very good.
In 2023, Grubhub generated revenue of 2 billion euros, but EBITDA of only 125 million euros. Free cash flow is similarly poor. To make matters worse, North America’s total market size, or total orders, was down 14% year over year. The company has been trying to unload Grubhub for some time and also presented group results excluding North America to avoid impacting its European operations.
But in the U.S., rivals DoorDash and Uber Eats are thriving. Meanwhile, Grubhub, through its Seamless brand, has disproportionate influence in New York City, where the city government has capped delivery fees and even cracked down on e-bike battery usage.
To be sure, Just Eat’s decision to take advantage of 2020’s high stock price and valuation multiple to acquire Grubhub was a smarter move than relying on debt or cash. Still, dilution remains a pain. Just Eat shares rose 15% on Wednesday on expectations that the turmoil would come to an end.
Grubhub’s buyer is Wonder, a New York-based ghost kitchen chain founded by billionaire entrepreneur Marc Lore. Wonder announced that it is raising $250 million in private funding in connection with its acquisition of Grubhub. I just hope it’s enough to fix this dodgy takeout order.
sujeet.indap@ft.com
