Buying and Selling

Uncertainty for Menulog as UK parent Just Eat agrees to $14 billion merger with rival

Matthew Elmas /

Menulog

Source: Menulog press kit.

Menulog’s British parent Just Eat has agreed, in principle, to merge with Amsterdam-based rival Takeaway.com in an £8.2 billion ($14.52 billion) deal that would create one of the largest meal-delivery players in the world.

Announced on Monday in the UK, the proposal will put both companies in a better position to compete with rivals UberEats and Deliveroo across the world, but throws a spanner in the works for the struggling Menulog business, as international investors mull the value of further investment Down Under.

A tie up between the businesses has been on the cards for months, with activist shareholder US-based Cat Rock Capital — which has a stake in both companies — successfully lobbying investors to move forward with negotiations.

Meal delivery has quickly become one of the fastest growing consumer markets globally over the last decade, and as leaders like UberEats and Deliveroo expand aggressively, there’s a view a combined Just Eats-Takeaway.com business would be better able to defend its turf.

Under UK laws, the pair will have until August 24 to get a solid offer on the table, before a final proposal is put before shareholders of both companies for approval.

Both parties have agreed on a set of initial terms for a merger and are in the advanced stages of further discussions to bring the companies together.

For Just Eats’ Australian arm Menulog, the proposal kicks off a renewed period of uncertainty. While Menulog was one of the first online meal platforms operational in Australia, it has subsequently been disrupted by UberEats and Deliveroo’s logistics-first models.

The company launched its own delivery service in April, but has been playing catchup after its UK parent was forced to book a £180 million ($318 million) write-down on its Australia and New Zealand segment in 2017.

Just Eats’ Australian revenue declined 8% in the first half of last year, improving in the second half to round out a flat result for the full year as the company outlined its optimism Menulog was on the path to profitability.

But the improvements have come alongside additional investment from Just Eats, particularly in the ongoing rollout of delivery (called SkipTheDishes) and not all investors are enthused.

Cat Rock founder and managing director Alex Captain, who has been critical of JustEats’ leadership in recent months, has previously outlined a dim view of the Australian arm.

In a February conference call with analysts from most of the world’s largest investment banks, Captain described Just Eats’ Australian business as “pretty challenged”.

“The UK is a phenomenal market and we think that Australia‘s a fundamentally very challenged market, where you have the same delivery fee and lower selection than a logistics player,” he said.

“If you look across what customers care about on online food delivery, they care about selection, they care about price and delivery fee, the care about the speed of delivery, they care about the technology and the UI, the user experience.

“Uber offers a better product on all of those criteria, vis-a-vis EatNow and Menulog in Australia.

“We would advocate that JustEat not spend a lot of resources trying to beat Uber in that market because it’s a structurally worse market than some of the other markets that Just Eat has,” Captain said.

A Menulog spokesperson directed SmartCompany to an announcement posted by its UK parent when asked whether the company was anticipating any changes as a result of the proposed deal.

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Matthew Elmas

Matthew is the news editor at SmartCompany. You can contact him at [email protected].

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