Analysts have speculated that Just Eat could become a target for other delivery players
Analysts have speculated that Just Eat could become a target for other delivery players © Bloomberg

A top 10 shareholder in Just Eat has said it will vote against the food-ordering company’s planned £9bn merger with Takeaway.com, as investors hold out for a higher bid.

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. 

The all-stock deal was presented in August as a “merger of equals”, creating a new European leader to take on Uber and Deliveroo. 

Takeaway.com’s offer gave Just Eat’s shares an implied value of 731p, a premium of 15 per cent to its closing price before news of the tie-up first emerged. But Just Eat’s stock has consistently traded above those levels since then, briefly rising above 800p before closing at 775.80p on Monday, suggesting that many Just Eat investors are anticipating a better offer.

“We believe that a valuation disparity of this degree is unprecedented in similar transactions over the past decade,” said Ricky Sandler, chief executive and chief investment officer of Eminence. 

Analysts have speculated that Just Eat could become a target for other delivery players including DoorDash, Amazon or Naspers. Investors will not vote on the deal until late October at the earliest, leaving time for another bidder to emerge. 

Aberdeen Standard Investments, another top 10 shareholder in the company, has already hit out at the offer price, saying that it “does not fully reflect the intrinsic value of the group, while exposing us to higher execution/integration risks medium term”. 

“As the share price continues to trade above the offer price, we (as well as the market) currently expect the offer will be raised in the coming weeks,” said Frederik Nassauer, investment director at Aberdeen Standard. 

Eminence first bought into Just Eat last year, according to a person close to the company, but has significantly increased its holdings since the deal talks were first reported, to about 4.4 per cent today. Eminence also holds a short position in Takeaway.com.

While Mr Sandler said Eminence supported the “industrial logic” of gaining scale as the two companies fought off new competition, “the proposed financial terms are far too favourable to [Takeaway.com] shareholders and far too unfavourable to [Just Eat] shareholders”.

Eminence argued that Just Eat will contribute the vast majority of the combined group’s estimated revenues and gross profits in 2020 but investors in the London-based group would own only 52 per cent of the new entity. 

Just Eat’s shares had fallen from above 780p in April to below 600p in July, as the search continued for a chief executive to replace Peter Plumb, who stepped down in January. 

To find a replacement, Cat Rock Capital, a US hedge fund, had pushed for Just Eat to explore a tie-up with a rival such as Takeaway.com. Several Just Eat shareholders, including Cat Rock but not Eminence, also hold stakes in Takeaway.com, making them more inclined to support the deal. 

The two food-ordering pioneers have argued that the combination will create a global leader in an increasingly competitive market, with an experienced leader in Jitse Groen, who founded Takeaway.com 20 years ago. 

In response to Eminence’s statement, Alex Captain, managing partner at Cat Rock, insisted that the deal represented a “compelling valuation for a combined business with great growth potential”. 

“Voting against the Just Eat and Takeaway.com merger benefits no one but Just Eat’s competitors,” Mr Captain said on Tuesday. “We think it is clear that Just Eat shareholders should vote for this merger unless a more compelling and credible counter-offer emerges.”

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