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Prosus issues warning about Just Eat's future as hostile bid intensifies

Nov 11 2019 14:23
Khulekani Magubane

Naspers' [JSE:NPN] global digital firm, Prosus, confirmed its cash offer of £4.9bn (R95bn) to acquire the British online food delivery service Just Eat, and lowered the level of shareholder approval it required for the offer - from 90% to 75%.

Just Eat has 27m customers, and 107 000 participating restaurants, in the UK, Australia, France, Brazil and other markets. It was founded in Denmark in 2001 by five entrepreneurs and listed on the London Stock Exchange. Last year, the group processed almost R80bn in orders.

The Prosus bid is hostile: the board of Just Eat is currently in negotiations about a deal with Takeaway.com, another large competitor in the market.

According to a statement from Prosus on Monday, the Takeaway.com offer values Just Eat shares at 594p each, while it is offering 710p. It is appealing directly to shareholders to accept the offer.

Prosus owns a number of food delivery businesses, including iFood in Latin America, Swiggy in India, and Delivery Hero, which operates in 41 markets.

During a teleconference call with reporters on Monday morning, Prosus CFO Basil Sgourdos said Prosus was currently in the best position to capitalise on synergies in the online food service market and to assist Just Eat in "the next phase of its development".

Prosus warned that Just Eat requires substantial investment in technology and capabilities to shift to an "own-delivery focused hybrid model", protect its market position and to capitalise on its long-term opportunity.

Prosus believes that financial markets are underestimating the urgency of this "transformation" and its likely financial impact on Just Eat. 

It believes that Just Eat’s "weakening operational and financial performance" is due to underinvestment, which is allowing well-funded own-delivery challengers (like Deliveroo and Uber Eats) to rapidly gain market share in Just Eat’s core markets.

It added that the proposed deal with Takeaway.com will not effectively address the challenges Just Eat is facing, and contended that Takeaway.com executives have consistently expressed pessimism about the merits of the own-delivery business model. 

"We believe our offer represents fair value and gives our shareholders certainty. We are very excited at the potential to add to our portfolio of food delivery businesses," said Sgourdos.

Prosus was unbundled from Naspers and listed in Amsterdam and on the JSE in September. The listing made Prosus the largest listed global consumer internet company in Europe, with more than 1.5 billion customers across 91 markets.

OLX investment

Meanwhile, the Prosus-owned online marketplace, OLX, announced that it would invest an additional $400m (around R6bn) in German online vehicle seller Frontier Car Group.

OLX first invested in $89m in FCG last year, and will now increase its stake and merge its joint ventures in India and Poland into the group.

Frontier Car Group serves more than 350 million people across five continents monthly by building destinations for buying, selling, and exchanging products and service.

just eat  |  prosus  |  britain  |  netherlands  |  offer  |  acquisition
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