Bidding war on the cards as Just Eat rejects £4.9bn hostile bid from Prosus
Just Eat could find itself at the centre of a bidding war after rejecting a hostile £4.9bn bid from investment firm Prosus that threatens to disrupt its merger with Takeaway.com.
The firm’s share price leapt 24 per cent to 732.8p despite the rejection in favour of its £8.3bn tie-up with the Dutch Takeaway.com as a bidding war loomed.
And analysts said the share price could leap even higher, with one saying a winning bid may have to offer 750p per share.
Read more: Just Eat revenue rises as it hopes for end-of-year merger with Takeaway.com
“Always a strong possibility given the increasingly low-ball offer from Takeaway.com, a bidding war is now on,” Neil Wilson, chief market analyst at Markets.com, said. “You may need more like 750p to sort this out.”
Chris Beauchamp, chief market analyst at spreadbetter IG, added: “[It] is now a firm target, having been approached by Prosus with a 710p cash bid.
“The response from the share price suggests that a bidding war is now in play, potentially sending the share price back towards the 900p high we saw in early 2018.”
Just Eat said Prosus’ bid “significantly undervalues” its business.
Prosus, the internet assets division of South African conglomerate Naspers, has muscled in on the food delivery website’s proposed merger with Dutch rival Takeaway.com.
Read more: Activist investor Cat Rock tells Prosus not to interfere with Takeaway.com bid for Just Eat
Prosus has made a cash offer of 710p per share for the online takeaway portal, valuing Just Eat at £4.9bn.
The offer is a 20 per cent premium to the value of Takeaway.com’s offer of 594p per share.
Just Eat said Prosus had made offers at 670p per share, 700p per share and 710p per share which it had rejected.
The delivery giant reacted by saying the 710p per share offer “fails to appropriately reflect the quality of Just Eat and its attractive assets and prospects”.
The firm added that the “Takeaway.com combination provides Just Eat shareholders with greater value creation than the terms of the Prosus offer”. It continues to recommend the Takeaway.com merger to shareholders.
‘Substantial investment required’ at food delivery giant
Prosus said it believes the food delivery firm requires “substantial investment, in excess of that planned by Just Eat management”.
And Prosus also said it “does not believe that the proposed combination with Takeaway.com will fully or effectively address this investment need”.
Read more: Just Eat ready to serve up £9bn merger with Takeaway.com
Prosus chief executive Bob van Dijk said:
We believe our global experience and resources can help Just Eat to achieve its significant potential. Our plan is to support the Just Eat management team, with whom we have worked closely as joint investors in Ifood, to deliver on the exciting opportunities to grow the business.
We believe that Just Eat’s customers and restaurant partners will ultimately benefit from more delivery options, greater restaurant choice as well as improved service and delivery speeds driven by the combined group’s expertise in product and technology innovation supported by increased capital investment in the business. As a combined group, we see significant growth and value creation potential.
He added that his firm has presented this idea “in good faith” to Just Eat, but has been “unable to engage constructively in what we see as a compelling proposition for Just Eat shareholders”.
“As an investor and operator with significant experience in this dynamic and competitive sector, both globally and on a local level, we believe we are best placed to support Just Eat through its next phase of essential investment,” van Dijk added.
“We aim to deliver value by eliminating operational execution risk and providing certainty for Just Eat’s shareholders today at an attractive premium.”
Prosus has an existing food delivery portfolio consisting of a 54.7 per cent stake in Brazil’s Ifood, a 22.3 per cent in German food app Delivery Hero and a 33.8 per cent stake in India’s Swiggy.
Read more: Top 10 Just Eat shareholder to vote against Takeaway.com merger
‘We frankly don’t see this as hostile’
Prosus chief executive van Dijk pushed back against questions on a press call asking whether a hostile approach for Just Eat was the correct one.
“The hostile labelling, that’s a convention. We frankly don’t see this as hostile. We have a good offer, we have not been able to come to an agreement…if you want to label it hostile that’s your choice,” he said.
“We have had a really constructive discussion with the Just Eat board. It was actually a good set of discussions [although] we didn’t come to agreement. We think this is a very attractive offer for shareholders we wanted to put a firm offer on the table so shareholders can consider that,” he added.
Van Dijk said the company planned to start a charm offensive to persuade Just Eat shareholders of the merits of its offer.
“We will start speaking to shareholders shortly,” he said.
He also contrasted Prosus’ all-cash offer with Takeaway.com’s all-share offer which has been hit by a slide in the share price of the Dutch company.
“We are really confident we have a good offer out there. We have a significant premium. There is also certainty because there is cash here on the table. The alternative is to be exposed to a fair amount of execution risk,” he said.
Market is sceptical of Takeaway.com merger
Just Eat and Takeaway.com agreed a merger deal in August, with shareholders set to vote on the deal on 4 December.
There has been some market scepticism about the terms of the deal, which critics say undervalues Just Eat.
Last month, US asset manager Eminence Capital, which holds a 4.4 per cent stake in Just Eat said it planned to oppose to the deal.
Ricky Sandler, chief executive and chief investment officer of Eminence, said: “The proposed financial terms are far too favourable to TKWY shareholders and far too unfavourable to JE shareholders. Accordingly, we intend to vote against this arrangement.”
Liberum analysts said yesterday: “We are sceptical that the proposed merger will be accepted by Just Eat shareholders as we believe that it substantially undervalues the business.”
They said the bid, which values Just Eat at 770p-780p per share, was too low. In sharp contrast, they gave it a buy rating and a target price of 1,360p.
“For comparison, Delivery Hero’s German assets were bought by Takeaway.com for over nine-times full-year 2018 revenues, which would value Just Eat’s shares at 1,030p on a comparative basis,” they said.
A bidding war is great for Just Eat shareholders
While investors have been sceptical of Takeaway.com’s low 731p per share offer, Markets.com’s Wilson said Prosus’ bid “is in many ways very cheeky and even more low-ball”, coming under Takeaway’s 731p merger price.
Read more: Just Eat and Takeaway.com agree terms on merger
“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,” Wilson added.
The analyst added that Amazon may table a bid for Just Eat if its multi-million pound investment in Deliveroo is blocked.
“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.”
Wilson said a bidding war is “good news” for shareholders, adding: “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.”
Yesterday, the food delivery firm announced that its third quarter revenue rose 25 per cent to £248m in the three months to 30 September.
It forecast underlying core profit of between £185m and £205m, including a hit from its proposed Takeaway.com deal of between £10m and £12m.