Just Eat Takeaway to acquire Grubhub for $7.3B • Hacker News Board

Re: Just Eat Takeaway to acquire Grubhub for $7.3B

#51

Post by dehrmann » Thu, Jun 11, 2020, 2:47 AM UTC

tybit wrote: post #20

It looks like Just Eat currently has a market cap of 5.233B pounds, 6.645B USD. How does an all stock acquisition of 7.3B USD work in this case? Is this done via issuing more than an extra 100% of stock on the expectation the new asset will counteract the dilution to keep the stock price similar?

> Is this done via issuing more than an extra 100% of stock on the expectation the new asset will counteract the dilution to keep the stock price similar?

While it sounds like they're not doing this, yes, you can do this.

Re: Just Eat Takeaway to acquire Grubhub for $7.3B

#52

Post by mmmBacon » Thu, Jun 11, 2020, 2:54 AM UTC

dehrmann wrote: post #50

crazygringo wrote: post #4

Genuine question: why? I completely understand acquisitions that create value by providing economies of scale, monopoly power or network benefits, or diversify or complement a company's activities. But for a European market leader to buy an American market leader in what is ultimately an extremely local business... I see no real added benefit here. Few further economies of scale when you're already at continent-size…

> providing economies of scale Developing a single platform counts as that. I guess it depends on how big fixed costs are compared to variable costs more than if you're the market leader. If they're a large component of them, then an acquisition could really help. Looks like their 2019Q4 total revenue was $1.3B, cost of revenue was $790M, and opex was $530M. I assume the hope is to save a lot on opex. > diversify or…

I’m not convinced that unifying the tech stacks here really buys much in the way of value for a food delivery business.

The real value is the business relationship with the delivery network. A deal that expands the delivery network and adds value to customers through reduced delivery times and improved overall service is the thing that scales.

Re: Just Eat Takeaway to acquire Grubhub for $7.3B

#53

Post by grogenaut » Thu, Jun 11, 2020, 3:11 AM UTC

cordite wrote: post #43

_jal wrote: post #28

Earlier quoted context omitted.

The economics are that when you insert a multinational between a local restaurant and a local hungry person, revenue to the restaurant drops, prices paid by the customer rise, and service gets worse. This is why after a couple orders right at the start of lockdown, I started calling restaurants directly. Some of them are delivering in breach of their contracts on the side, the rest I just walk over and pick up.

Ever go to an Italian restaurant and they have a 30 minute or so variance in how soon they bring your order? That’s because they don’t adjust for the online orders in their kitchen. Either constrained by physical size or staff, also most services don’t rate limit how many orders go to singular restaurants. It’s especially hard for a restaurant to suspend online ordering if they rely on email, fax, or robo called orde…

I've been to resturants in the 80s and 90s and had these variances, it's not just because of online ordering, some kitchens are just bad.

Re: Just Eat Takeaway to acquire Grubhub for $7.3B

#54

Post by replyguy912 » Thu, Jun 11, 2020, 3:17 AM UTC

crazygringo wrote: post #4

Genuine question: why? I completely understand acquisitions that create value by providing economies of scale, monopoly power or network benefits, or diversify or complement a company's activities. But for a European market leader to buy an American market leader in what is ultimately an extremely local business... I see no real added benefit here. Few further economies of scale when you're already at continent-size…

This is an all stock deal, so valuations are about as realistic as a televised poker tournament. No one is paying a 27% premium in cash; they're spending their own ridiculously valued stock.

There is no business model in the world that makes grubhub a 7B company. If proven wrong I will gladly eat a hat delivered by them.

Re: Just Eat Takeaway to acquire Grubhub for $7.3B

#55

Post by hayksaakian » Thu, Jun 11, 2020, 3:21 AM UTC

whack wrote: post #37

hayksaakian wrote: post #21

Earlier quoted context omitted.

1 example: they could take on debt from a Bank to make the purchase for example. "Just Eat Takeaway was created this year through the $7.8 billion combination of two of the earliest participants in Europe’s food-delivery market, Just Eat and Takeaway.com. It has been fighting competition in Europe from Uber Eats and Deliveroo, a London-based company whose investors include Amazon. Mr. Groen, a Dutch entrepreneur, fou…

> 1 example: they could take on debt from a Bank to make the purchase for example. How is taking on debt, relevant to an all-stock deal? An all-stock deal means that Grubhub shareholders aren't receiving any cash, they are receiving $7.3B worth of JustEatTakeaway stock. The only interpretation I can think of, is what the previous poster said - the existing shareholders of JET are getting significantly diluted

Right, I was just giving an example of how a smaller company can buy a larger company

Re: Just Eat Takeaway to acquire Grubhub for $7.3B

#56

Post by replyguy912 » Thu, Jun 11, 2020, 3:21 AM UTC

VWWHFSfQ wrote: post #44

alfalfasprout wrote: post #35

Is it just me or are all these delivery apps pretty much the same thing, just with different restaurants? In SF at least Grubhub tends to have some of the more "typical delivery" choices (pizza, chinese food, thai) and decent customer service, Doordash seems to have the most variety but the dashers take their merry time on their way to you (and customer service is nonexistent), Uber Eats is somewhere in between grubh…

I prefer Grubhub/Seamless in NYC. They're typically on bicycles or scooters and will bring the order up to your apartment door. Uber Eats people usually want you to come down outside so they don't have to double-park. I'm not giving you a $10 delivery tip to drive my Five Guys order eight blocks.. You gotta get out and come up the stairs to my door.

or you could, ya know, walk 8 blocks and keep the restaurant in business, but hey, we all have our limits.

Re: Just Eat Takeaway to acquire Grubhub for $7.3B

#57

Post by twunde » Thu, Jun 11, 2020, 3:22 AM UTC

granzymes wrote: post #24

bradleyjg wrote: post #9

Earlier quoted context omitted.

Mergers and acquisitions rarely work out for the entities as such. To understand why they nonetheless continue to happen so often it’s necessary to peer beyond the corporate veil and look at the incentives of the individual players.

>Mergers and acquisitions rarely work out for the entities as such. Could you provide a source for that?

An oft-cited HBR article, https://hbr.org/2016/06/ma-the-one-thing-you-need-to-get-rig..., states that 70-90% of acquisitions are considered failures.

Re: Just Eat Takeaway to acquire Grubhub for $7.3B

#58

Post by silentsea90 » Thu, Jun 11, 2020, 3:23 AM UTC

alfalfasprout wrote: post #35

Is it just me or are all these delivery apps pretty much the same thing, just with different restaurants? In SF at least Grubhub tends to have some of the more "typical delivery" choices (pizza, chinese food, thai) and decent customer service, Doordash seems to have the most variety but the dashers take their merry time on their way to you (and customer service is nonexistent), Uber Eats is somewhere in between grubh…

Why is cold food a problem? It is easy to heat it up in a microwave right?

Re: Just Eat Takeaway to acquire Grubhub for $7.3B

#59

Post by replyguy912 » Thu, Jun 11, 2020, 3:23 AM UTC

tybit wrote: post #20

It looks like Just Eat currently has a market cap of 5.233B pounds, 6.645B USD. How does an all stock acquisition of 7.3B USD work in this case? Is this done via issuing more than an extra 100% of stock on the expectation the new asset will counteract the dilution to keep the stock price similar?

pretty much like you've described. When you're making up the valuation and spending your own currency there's no problem; you control both sides of the balance sheet

Re: Just Eat Takeaway to acquire Grubhub for $7.3B

#60

Post by replyguy912 » Thu, Jun 11, 2020, 3:25 AM UTC

viscanti wrote: post #46

tybit wrote: post #20

It looks like Just Eat currently has a market cap of 5.233B pounds, 6.645B USD. How does an all stock acquisition of 7.3B USD work in this case? Is this done via issuing more than an extra 100% of stock on the expectation the new asset will counteract the dilution to keep the stock price similar?

They're getting stock in a post-acquisition combined entity. So a better way to think of it is they get 52% of the combination of both companies (which makes it weird to think they're the ones getting acquired - but that has to do with which entity ends up being the controlling entity).

this is just a more honest merger. Someone is always getting acquired, in this case they're upfront about who has post-deal control.