An activist bites
Two years after Just Eat and Dutch rival Takeaway.com merged, the food delivery giant is under pressure from one of its biggest shareholders.
Cat Rock Capital, which had shares in both Just East and Takeaway.com, has called for urgent action to prop up its share price and avoid a hostile takeover. Alex Captain, Cat Rock’s founder, wants the group to explore “strategic options” including selling its Brazilian business or merging with a rival such as Amazon, Delivery Hero or DoorDash.
Cat Rock has grown frustrated about the fall in Just Eat Takeaway’s share price — down 23 per cent over the past year, valuing it at €15.6 billion (£13.3 billion) — which has come even as food delivery companies have boomed in the lockdowns as families ordered more meals at home. Cat Rock says its drifting stock price has left the giant vulnerable to a cut-price bid. Just Eat Takeaway said that it had “regular dialogue with all its shareholders” and took all their views very seriously.
Growth, then indigestion
Just Eat was brought to the UK by former Coca-Cola executive David Buttress in 2006, having been launched in Denmark in 2001. In its first month it had sales of £36. By the second month it was £236, and within six months it was taking £7,000. By the time it listed on the London Stock Exchange eight years later, Just Eat was dominating markets in Australia, Brazil, Canada and Denmark. In November 2017, it was promoted into the FTSE 100.
Just Eat initially operated as a middleman between consumers and independent takeaways, but built its own fleet of couriers to counter the threat from Deliveroo and Uber Eats. In 2019, Cat Rock issued a scathing letter attacking the appointment of Peter Plumb, the former boss of Moneysupermarket, as chief executive. He had replaced Buttress, 45, in 2017. Plumb, 57, was shown the door after just 16 months. The hedge fund demanded the company seek a merger with a rival, complaining it had become the world’s worst-performing online food delivery stock. It pushed for Just Eat to merge with Dutch outfit Takeaway.com, almost half its size. The deal was approved, with Takeaway.com’s Jitse Groen made chief executive.
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Strain starts to show
Despite a boom in sales in lockdowns, losses at Just Eat Takeaway soared last year as it offered discounted or free delivery in the UK to tempt customers. In March, it said full-year sales had risen by 54 per cent to €2.4 billion (£2 billion) but pre-tax losses had widened 67 per cent to €147 million.
It has also been digesting the $7.3 billion (£5.3 billion) takeover of US operator Grubhub in June. At the results, Just Eat Takeaway said this meant it could not provide a financial outlook for this year. Since then, the shares have fallen 13 per cent. In contrast, America’s DoorDash has risen by more than 25 per cent in the same period. It has also been struggling with PR. In April, Just Eat Takeaway chief Jitse Groen launched an angry tirade on Twitter, claiming some City analysts “can’t even do basic maths”. Groen, 43, apologised for his “uncalled for” attack.
Charges leave sour taste
Just Eat Takeaway has also had to explain an increase in its charges in the UK. The Sun reported last week that a service charge added to customers’ bills had been increased from 50p to as much as £1.99. In response, takeaway app Foodhub, a smaller rival, offered to give them a discount of the same amount provided they used a special code: JustNo.
Just Eat’s 50p service charge was introduced in January 2018, on top of delivery fees, which vary between 99p and £3. They can also be free. Just Eat Takeaway said the increased service charge, added to the average commission of 30 per cent charged to restaurants, would affect orders only when its own drivers handled the delivery. It said the increase was to reflect “continued investment” in its delivery service.
Uber Eats typically charges 10 per cent of the order value as a service fee, capped at £2.99, on top of delivery charges. Deliveroo charges a 5 per cent fee, capped at 99p, as well as delivery charges.
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Food fight gets messy
As Britain emerges from restrictions, meaning families can return to restaurants and pubs instead of eating at home, Just Eat Takeaway — whose TV ad campaign features rapper Snoop Dogg — and its rivals will discover whether the bump in sales was simply short term.
It must also deal with its most vocal investor. Cat Rock, which published its demands on a website labelled Just Eat Must Deliver, declared it was “deeply disappointed” by the company’s “poor handling” of its relationship with investors. It had failed to explain the costs of its investments in logistics and its communication was “deeply flawed”.
Cat Rock noted that Just Eat Takeaway’s share price had fallen by 11 per cent over the past two years even as its gross merchandise value — a key sector metric — more than doubled. Shares in Just Eat Takeaway closed on Friday at £63.80.
It will now be under pressure to convince Cat Rock and other investors why it should retain its independence, rather than being merged yet again with a rival. This food fight is far from over.
