Two technology companies were among the biggest FTSE 100 share price gainers in July. Shares in Vodafone (LSE: VOD) rose by around 16% on the back of news that the telecoms giant will spin off its mobile tower infrastructure into a separate unit that could be listed.
Just Eat (LSE: JE) announced an all-share merger with Takeaway.com. The combination is expected to create a “European powerhouse”, according to one analyst, which should help the online food ordering app to compete against the likes of Uber Eats and other emerging competitors.
Evolving Vodafone
Investors in the telecoms giant were left disappointed when the company took an axe to its prized dividend. In May, the dividend was cut by 40% as the group needs to bring down debt and have the firepower for acquisitions.
Taking the tough action needed to remove some of the burden of the dividend seems sensible and should pay off for shareholders willing to take a longer-term view. Proceeds from the IPO of the masts business will also pay down some of Vodafone’s huge debt. Helping balance the books was the sale of its New Zealand operations to a joint venture of infrastructure firm Infratil and asset management giant Brookfield, for around £1.85bn.
Vodafone has managed to acquire growth with the completion of Liberty Global’s operations in Germany and the Czech Republic, Hungary, and Romania (CEE) for a total enterprise value of €18.4bn (£16.77bn). The telecoms giant now claims to be “Europe’s leading converged operator“, with 54 million cable and fibre households on its network, and a total next-generation network reach of 124 million homes and businesses.
Vodafone is evolving and if its latest acquisition works out, its patchy financial performance should improve. Although many investors cherished the dividend, I think it was vital with the challenges the business faces for it to be cut — and the yield is still above 5%, after all.
What next for Just Eat?
After the merger completes, Just Eat shareholders would receive 0.09744 Takeaway.com shares for each Just Eat share and would own 52.2% of the combined group. The new and larger group would be headquartered in Amsterdam and listed on the London Stock Exchange, with a “significant part of its operations” in the UK.
Combined, Just Eat and Takeaway.com had 360m orders worth €7.3bn in 2018 and strong positions in the UK, Germany, the Netherlands and Canada. In 2018, Just Eat had 26.3 million customers while Takeaway.com had 14.1 million, Just Eat had 221 million orders versus Takeaway.com’s 94 million. Both are strong businesses and together they aim to be even better.
Overall the deal seems to be a good one for Just Eat. Competition concerns had been affecting the share price, making the merger very convenient. The emerging food delivery market requires scale and that is what Just Eat gets by combining with its Dutch peer.
It’s hard to tell at this stage what the future holds for both companies. Both are going through significant change and face big challenges so I’m happy to watch and see what happens next.
