Shares in Just Eat surged 24% to 733p today after receiving a counter bid from Prosus that values the company at £4.9 billion.
The 710p cash offer from Prosus is a 20% premium to the Takeaway.com offer and about 12% higher than the shares were trading before the latter’s bid. Always a strong possibility given the increasingly low-ball offer from Takeaway.com, a bidding war is now on. You may need more like 750p to sort this out.
The board of Just Eat has been engaged with Prosus but had already lower rejected bids and it has been quick to reject this offer. Prosus has sniffed an opportunity as the all-stock offer from Takeaway.com has left JE shareholders nursing paper losses due to a drop in Takeaway.com shares.
“Having initially valued JE at 731p, the latest implied offer for the company prior to the Prosus bid was a more meagre 594p,” says Neil Wilson, Chief Markets Analyst at Markets.com. “The more Takeaway.com shares fell after the bid the less attractive the offer and the greater the likelihood of a cash counter bid. Takeaway.com shares are trading +4% on this.”
There have been doubts about the Takeaway.com offer being a bit low-ball. The Prosus offer is in many ways very cheeky and even more low-ball – it’s still under the 731p initial offer from Takeaway.com and whilst it has been rejected, will certainly up the ante and could force Takeaway.com into raising its offer as it looks in a weakened position due to the stock’s decline.
“That may not seem right looking at Just Eat’s recent share price of 586.90 but if taking into account that the company is in the midst of a £9 billion merger with Dutch rival Takeway.com and that it reported revenue growth of 25% in the last quarter Just Eat’s argument seems much stronger,” observes Fiona Cincotta at City Index.
Will this mean a bidding war for Just Eat?
After the news of the Takeaway.com bid, investors were minded to think there was a prospect of a bidding war, with potentially Amazon coming in after the CMA called a halt to its integration with Deliveroo.
“It’s good news for JE shareholders,” comments Wilson at Markets.com. “Any tie-up offers the best way out, but management clearly think the strategic long-term value comes from the expertise of a hand-in-glove tie-up with Takeaway.com still.”
As previously noted, a merger/takeover of enough scale gives Just Eat and its interim CEO the perfect exit, whilst also creating a company with the scale and strength to take on Deliveroo, Uber Eats and Amazon. Global expansion and fighting off fierce competition is coming at a cost. It has become a difficult task in managing growth and building out scale without eroding margins. Investment in Latin America via its 33% stake in iFood is proving especially costly.