Yesterday, FTSE 100 company Just Eat Takeaway.com (LSE:JET) confirmed via news release that it is set to combine with America’s Grubhub. Just Eat will obtain 100% of the shares in the U.S. company in a $7.3bn deal. This will create a leading global online food delivery service. Prior to this announcement, Grubhub was in talks with global taxi group Uber, but antitrust concerns caused this potential partnership plan to dissolve.
Meals on wheels
Just Eat Takeaway is a European meal delivery service founded in Amsterdam. Originally two separate companies, it has been a constituent of the FTSE 100 Index since Takeaway.com acquired Just Eat for $7.8bn in February this year.
The merger between Just Eat Takeaway and Grubhub will strengthen its existing position and extend its reach throughout North America. It will also create the world’s largest online food delivery company outside of China. The combined group will serve customers in 25 countries.
Share price volatility
The all-stock deal values Grubhub at $75 a share. Earlier this month Just Eat Takeaway saw a share price high reach over £90, whereas today it is around £77. The Just Eat share price is up 2% as I type, but that is after a 13% fall on the news. There is no doubt this is a volatile time for share prices, and with the restaurant industry hard hit by the coronavirus pandemic this volatility is likely to continue for some time.
In 2019 Just Eat processed around 593m orders and had a global customer base of over 70m. The company’s order book doubled in the first quarter of 2020. But cyber-attacks affected its orders in March, as did restaurants closing when the UK lockdown began. Overall, the business continues to show resilience as online orders prevail. The company share price is up 38.5% in three months, despite its recent decline, and it has a market cap of £4.6bn.
Just Eat has heavily invested in improving its delivery network and technology capabilities to make it a market leader. This has reduced its ability to create a profit, and earnings per share are negative. Analysts believe it should be profitable by the end of the year. As such, I believe it is a FTSE 100 stock with growth potential.
All together I see this as an exciting merger in an area that looks likely to remain in demand. As lockdown is eased and families and friends are gradually allowed to see each other again, takeaways could be a splendid way to enjoy time together. Equally, takeaways may become the favoured and cheaper alternative to dining out. Restaurants and cafes have already opened their doors to home delivery in an effort to drum up business in lockdown. I think the Just Eat Takeaway share price is a good addition to your Stocks and Shares ISA.
Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has recommended Just Eat Takeaway.com N.V. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.