Power Balance in Food Delivery Shifts As Just Eat Takeaway Steals Grubhub From Uber
Grubhub is set to be acquired by Just Eat Takeaway.com for $7.3 billion following a failed attempt by Uber to purchase the U.S. food delivery company.
Shifting the hierarchy: The companies claim the merging of the two would form the largest online food delivery operator in the world outside of China as measured by revenue and gross merchandise volume. Together, Just Eat Takeaway.com and Grubhub had 71 million global active customers with 593 million orders processed in 2019, producing $15.3 billion of gross merchandise value and $3 billion of revenue.
What the deal means for U.S. food delivery space: According to Stifel analyst John Egbert, “the U.S. food delivery space likely just became more competitive rather than less,” citing limited antitrust risk for the transaction. Just Eat Takeaway emphasized they will prioritize growth over profits, particularly with Grubhub’s leading positions in New York and other large cities.
Missing out on Uber: There are several advantages a deal with Uber would have given Grubhub that are not provided in the acquisition by Just Eat Takeaway, according to D.A. Davidson analyst Tom Forte.
Labor: access to Uber’s network of drivers who are not already using Grubhub.
Logistics, which Forte calls “Uber's core competency.”
Lobbying: Uber’s size and influence would give Grubhub power while navigating a complex regulatory environment.
The risks: While many on Wall Street expect there to be a small chance that the deal gets blocked by regulators, Forte believes it is likely that the combined entity will attract pressure from politicians to make concessions, such as making temporary commission caps permanent. Forte also expresses skepticism about the ability of a U.S. and an international company in the internet sector to successfully merge.
How Grubhub got here: After being founded in 2004, Grubhub merged with Seamless in 2013. In 2014, Grubhub began trading on the New York Stock Exchange. Grubhub sought out more growth through an acquisition of Eat24 in 2017. Since trading at over $130 a share in April 2018, Grubhub has struggled to fend off competitors and has seen its stock price plummet.
