Blog 3
Can the merger of two takeaway businesses leave a bad review?
Just Eat PLC is the one of the UK's largest and most popular online takeaway ordering platforms. The takeaway provider has over 16,000 restaurants now on the platform and serving over 3 million customers worldwide (PLC, 2019). Ordering a takeaway can be a spur of the moment decision and the online system that "Just Eat" provide streamlines the ordering process and brings many benefits to their customers.
So why is Just Eat so popular?
One of the main benefits that is brought from using the online ordering system is that you can see other customers reviews, therefore giving a true insight into what the food from each restaurant is like. This aspect is great when wanting to try some where new or maybe ordering from a area where you have never visited before. Along with being able to see other reviews ordering online means you can also pay online, making the decision to order out even easier as most traditional take away services when you order direct from the food provider only accept cash as a form of payment when food is delivered.
A takeover or acquisition is the purchase of one company by another. We call the purchaser the bidder or acquirer, while the company it wants to buy is the target. It is a type of merger, but not of equals. In the case of an acquisition, there is a predator and a prey (News, 2019).
In the past couple of weeks there has been many bids from multiple large corporations for the online food provider. In the last couple of weeks there has been talks of a Just Eat merger with another online food ordering platform "Takeaway.com". As Just Eat sells shares for their company this means that when decisions need to be made within the company it goes before the board of directors.
Just Eat’s board rejected the all-cash offer, made through Naspers’ Dutch-listed vehicle Prosus, saying it “significantly undervalued” the UK company. It is worth 710p a share in cash, compared to a 731p a share value when the all-stock merger was agreed in July, although this has since fallen to 594p with Takeaway.com's shares on the decline (Nutall, 2019). This meant that the decision was made to hold out for a higher bid, that the board felt was more fitting for the popular company. Eminence Capital the New York-based hedge fund that holds more than 4 per cent of Just Eat, said Takeaway.com’s offer was “highly opportunistic” and a “gross undervaluation” of the UK-based online food marketplace (Bradshaw, 2019). The company announced they are expecting bids from Amazon and Doordash therefore holding out to accept a deal until late October at the earliest, leaving time for another bidder to emerge.
There would be many benefits brought to Just Eat from merging with another takeaway company if they chose the right one. If only they could easily read some reviews on what its like working with the different companies who are in the run to merge as easy as it is to read reviews on the best Chinese around. Merging would mean that Just Eat combination will create a global leader in an increasingly competitive market, bring two sets of loyal customers together can only lead to success. However if the merger/ takeover isn't delivered smoothly then this could create some issues within the company. Hostile bids are unsolicited offers for a significant stake of the target shares that are not
recommended or approved by the target company’s management. Therefore, by means of
the hostile tender offers, bidders try to acquire shares directly from target shareholders
skipping target’s board (Loo, 2012).
Could the decision for Just Eat to be waiting around for the best bid mean they will eventually miss out on a deal? Weather the takeover/ merger be hostile or not the company need to make a decision while their stock market prices are staying steady and doing well, as shown in the graph (Bloomberg, 2019). Just Eat had previously agreed on the terms of a 4.7 billion pound ($6.1 billion) all-share deal that prompted internet giant Prosus to weigh in with an unsolicited cash offer of $6.3 billion, or 710 pence per share, setting an increasingly fractious contest in motion(Sterling, 2019).
There has been some update on the bids being offered for Just Eat as of the 4th of November. Takeaway is moving from a “scheme of arrangement” to a conditional offer, the company said in a statement on Monday. The offer will be approved if investors holding 75% of Just Eat’s shares agree to it. The company’s previous offer would have given Takeaway full control of Just Eat if it got 75% of voting shareholders to agree to the bid. The new offer means that it can lower the threshold to anything above 50% of the company’s shares, potentially making it easier to get a deal done. But the strategy risks having investor holdouts who refuse to tender their shares (Thomson, 2019). But does this new offer mean that Just Eat will finally close on a deal? As of today a final decision has still not been made.
In conclusion when companies merge or get taken over it can not always bring benefits to businesses, however Just Eat merging with any of the companies that are bidding would benefit them. In my opinion after looking over all the offers being made i believe they should merge with Takeaway.com, this would result in the creation of the biggest food delivery groups outside China, therefore rivalling Uber Eats. Market leadership in Britain Germany and the Netherlands would follow.
Bibliography
Could the decision for Just Eat to be waiting around for the best bid mean they will eventually miss out on a deal? Weather the takeover/ merger be hostile or not the company need to make a decision while their stock market prices are staying steady and doing well, as shown in the graph (Bloomberg, 2019). Just Eat had previously agreed on the terms of a 4.7 billion pound ($6.1 billion) all-share deal that prompted internet giant Prosus to weigh in with an unsolicited cash offer of $6.3 billion, or 710 pence per share, setting an increasingly fractious contest in motion(Sterling, 2019).There has been some update on the bids being offered for Just Eat as of the 4th of November. Takeaway is moving from a “scheme of arrangement” to a conditional offer, the company said in a statement on Monday. The offer will be approved if investors holding 75% of Just Eat’s shares agree to it. The company’s previous offer would have given Takeaway full control of Just Eat if it got 75% of voting shareholders to agree to the bid. The new offer means that it can lower the threshold to anything above 50% of the company’s shares, potentially making it easier to get a deal done. But the strategy risks having investor holdouts who refuse to tender their shares (Thomson, 2019). But does this new offer mean that Just Eat will finally close on a deal? As of today a final decision has still not been made.
In conclusion when companies merge or get taken over it can not always bring benefits to businesses, however Just Eat merging with any of the companies that are bidding would benefit them. In my opinion after looking over all the offers being made i believe they should merge with Takeaway.com, this would result in the creation of the biggest food delivery groups outside China, therefore rivalling Uber Eats. Market leadership in Britain Germany and the Netherlands would follow.
Bibliography
Bloomberg.
(2019). Retrieved from https://www.bloomberg.com/quote/JE/:LN.
Bradshaw, T.
(2019). Hedge fund takes aim at £9bn Just Eat-Takeaway.com merger.
Financial Times.
Loo, S. C.
(2012). THE EFFECT OF THE HOSTILE TAKEOVERS ON COMPANIES’CORPORATE. 50.
News, M. B.
(2019). What is a takeover? Definition and meaning. Retrieved from
https://marketbusinessnews.com/financial-glossary/takeover-definition-meaning/.
Nutall, C.
(2019). Naspers grasps at Just Eat. London : Financial Times .
PLC, J. E.
(2019). Retrieved from
https://twitter.com/JustEatPLC/status/1189134245966598144.
Sterling, N. Z.
(2019, November 04). Takeaway.com tweaks Just Eat offer in move to thwart
rival Prosus. Retrieved from https://uk.finance.yahoo.com/news/3-takeaway-com-tweaks-just-143458479.html.
Thomson, A.
(2019, November 04). Takeaway Makes Just Eat Offer More Flexible.
Retrieved from
https://www.bloomberg.com/news/articles/2019-11-04/takeaway-makes-just-eat-offer-more-flexible-in-prosus-challenge.
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This is very interesting, didn't know about the merger currently taking place
ReplyDeleteThank you Ryan, if you are interested in reading more about it here are some links below.
Deletehttps://www.ft.com/content/01d77b0c-1a58-11ea-97df-cc63de1d73f4
An interesting discussion surrounding the proposed merger. Do you think that the two companies may have different operating cultures? Could this mean that when merging the two, they may lose the original client base due to a change in company ethics? Consumers are very brand loyal and so do you think the initial customer base would remain?
ReplyDeleteHi Emily,
DeleteI think the two companies have slightly different operating cultures due to their different cultures, however i do not believe that this would effect Just Eat Plc as a whole going forward if they were to accepting the merging bid. I think the initial customer base that Just Eat have grown over the years would continue to remain loyal as this merger would only mean that Just Eat Plc would have more capital to invest into their organisation and resulting in many benefits being brought to both the company and their customers.
If you are interested in keeping up to date with the Just Eat Plc takeover / merger here is a link where you can see the most up to date articles.
https://www.ft.com/stream/3ac6989e-8e94-4ba1-8680-64ab698a6464