European service buys Grubhub for $7.3 billion

Just Eat Takeaway, a European food-delivery service, said Thursday it had agreed to acquire Grubhub in an all-stock offer valued at $7.3 billion, creating the world's largest online food-delivery service outside of China.

The acquisition of Grubhub gives Just Eat Takeaway entry into the US market, where demand surged during the novel coronavirus lockdown.

The deal is part of the continued consolidation of the highly fragmented industry and an attempt to create the clout needed to dominate the market where's there's little to distinguish one company from another.

"Combining the companies that started it all will mean that two trail-blazing startups have become a clear global leader," Grubhub CEO Matt Maloney said in a statement.

The deal is expected to close in the first quarter of 2021.

"The combination doesn't really change or improve (Grubhub's) positioning in the US, which had seen lagging growth rates versus competitors and a bigger competitive hit in New York City, particularly through COVID-19 relative to Uber Eats or DoorDash," Brad Erickson, an analyst at Needham, said in research note to investors.

News reports of a prior offer from Uber prompted Just Eat Takeaway to go after Grubhub, Reuters reported.

The deal frees Grubhub from antitrust concerns that swirled around its talks with UberEats, a division of the ride-hailing company Uber Technologies, analysts said.

The combined company will concentrate on four of the world's strongest markets for online food delivery: Netherlands, Germany, the UK and the United States. Just Eat Takeaway also owns Skip The Dishes in Canada.

Globally, the newly combined company has about 70 million customers and delivered about 593 million orders in 2019.

Just East Takeaway generated about $1.7 billion in revenue compared with Grubhub's $1.3 billion, the companies said in announcing the deal. The combined company will be based in Amsterdam, with the US division headquartered in Chicago.

Competitors include Postmates, DoorDash, Zomato, Slice, Amazon Restaurants, Deliveroo, ChowNow and Delivery.com.

Grubhub, UberEats and DoorDash together account for about 80 percent of the US market.

In the US, the industry generated about $18.8 billion in revenue in 2019. Analysts expect the sector to grow to $37.7 billion in 2024.

Grubhub went public in April 2014 and gained 31 percent on its first day of trading on the New York Stock Exchange.

In January, Just Eat acquired Takeaway for $7.8 billion.

The deal gives Grubhub shareholders American depositary receipts valued at 0.6710 per Just Eat Takeaway ordinary share, in exchange for each Grubhub share, or $75.15 for each Grubhub share based on the June 9 closing price of Just Eat Takeaway's stock.