HOOFDDORP, Netherlands–(BUSINESS WIRE)–NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF THAT JURISDICTION
1. Increased Cash Offer
On 22 October 2019, Prosus N.V. (Prosus) announced the terms of a cash offer by its wholly-owned indirect subsidiary MIH Food Delivery Holdings B.V. (MIH), to acquire the entire issued and to be issued share capital of Just Eat plc (Just Eat) (the Offer Announcement). On 11 November 2019, the Offer Document setting out the full terms and conditions of the Offer was published.
Today, Prosus is pleased to announce the terms of an increased cash offer for the entire issued and to be issued share capital of Just Eat by MIH (the Increased Offer).
Under the terms of the Increased Offer, Just Eat Shareholders will be entitled to receive:
740 pence in cash for each Just Eat Share
The terms of the Increased Offer value the entire issued and to be issued ordinary share capital of Just Eat at approximately £5.1 billion and represent a premium of approximately:
- 25.6 per cent. to the Closing Price of 589 pence per Just Eat Share on 21 October 2019 (being the last Business Day before the date of the Offer Announcement); and
- 24.6 per cent. to the value of the Takeaway.com Offer of 594 pence per Just Eat Share based on Takeaway.com’s Closing Price of €71.00 on 21 October 2019 (being the last Business Day before the date of the Offer Announcement);
MIH also announces today that it has reduced the level of acceptances required to satisfy the Acceptance Condition to a simple majority (50 per cent. plus one Just Eat Share) of Just Eat Shares, thereby significantly increasing deal certainty.
As a consequence of today’s announcement, the closing date of the Increased Offer has been extended to 1.00 p.m. on 27 December 2019.
Save as set out in this announcement, the Increased Offer is subject to the same terms and conditions as the Offer. The Increased Offer is a revision to the Offer and should be construed accordingly.
Commenting on the Increased Offer, Bob van Dijk, the Group CEO of Prosus said:
“Following the announcement of our offer, we have had the opportunity to listen to the views of Just Eat Shareholders, share our perspective on the global food delivery sector and reflect on the unquestionable challenges Just Eat faces, as clearly seen in its Q3 results. We have also had extensive discussions with our own shareholders with regards to our long term strategy for food delivery and Just Eat’s role within that. We continue to believe in the sector and, as we have demonstrated in Brazil, if you act decisively and invest effectively in technology as well as the opportunities of own-delivery, then you can build an attractive growth business that is equipped to win in the long-term. We believe the investment required is substantial and this impacts our view of potential returns. As disciplined investors we obviously need to factor the required investment into our value considerations.
Just Eat is a quality business, which we believe has all the ingredients to be transformed into a long-term sector winner. In recognition of this potential, we have decided to increase our offer to 740 pence per share, which we believe provides Just Eat Shareholders with compelling value and therefore good reason to accept our all-cash offer. Unlike the Takeaway.com Offer, which relies on shares remaining at an above sector multiple, our cash offer provides certainty of value to Just Eat Shareholders. We urge shareholders to accept our offer, as it is the only one that delivers certainty in the face of undeniable industry change.”
2. Overview of the Increased Offer
Following Prosus’s offer for Just Eat, Prosus’s management have had extensive discussions with Just Eat Shareholders to explain the rationale for the Offer and the compelling value it represents. Prosus’s management have also had extensive discussions with Prosus’s own shareholders, including at Prosus’s recent Capital Markets Day with regards to Prosus’s long-term strategy for food delivery and Just Eat’s role in this strategy.
Prosus continues to believe that Just Eat is an attractive business, albeit one that requires investment which has now also been acknowledged by the Just Eat Board, which Prosus has taken into account when assessing the targeted return on investment for its shareholders and the price it can justify offering for Just Eat.
Following careful consideration, and in the interest of bringing the process to a close, Prosus has decided to increase its offer to 740 pence per Just Eat Share in cash, whilst also reducing its acceptance condition to a simple majority (50 per cent. plus one Just Eat Share). Prosus believes the Increased Offer underscores its commitment to the transaction and constitutes attractive and certain value for Just Eat Shareholders, while allowing Prosus to target appropriate risk-adjusted returns for its own shareholders.
The Increased Offer is at a 25.6 per cent premium to Just Eat’s closing share price on 21 October 2019 (the last Business Day before the date of the Prosus Offer Announcement), which Prosus believes compares favourably with precedent premia for such transactions in a UK context when taking into account that the Just Eat share price on the day before the Offer Announcement (21 October 2019) of 589 pence already included a premium from the Takeaway.com Offer. The Increased Offer also represents a 10.4 per cent. premium to the initial offer of 670p made to the Just Eat Board by Prosus. Further, the value of the Increased Offer comes at a premium to the value of the Takeaway.com Offer when it was announced of 731 pence, which was recommended by the Just Eat Board. Prosus encourages the Just Eat Board to recognise the superior value of Prosus’s Increased Offer.
The Increased Offer is superior to the look through value of the Takeaway.com Offer and provides certainty of value for Just Eat Shareholders, in contrast to the significant risks associated with swapping into the shares of a company currently trading on a revenue multiple 3 times higher than Just Eat’s own unaffected multiple.
2.1 Prosus’s Increased Offer provides compelling and certain value for a business that is facing substantial challenges
While Prosus believes Just Eat is an attractive business with strong long-term potential, it is currently facing significant challenges. Just Eat’s historically strong market positions are being eroded by intensifying competition in the UK and other core markets, including Spain and Italy, with market share loss recently accelerating in a number of markets. Just Eat has seen UK year-on-year order growth deteriorate substantially from 30.9 per cent. in 2016 to 8 per cent. in Q3 2019 and UK EBITDA margin decrease from 51.4 per cent. in 2016 to 35.2 per cent. in H1 2019. Just Eat has lost its leading position in five of its thirteen markets. Unsurprisingly, shareholder returns have similarly suffered – over the last two years Just Eat has delivered a negative shareholder return of -15.6 per cent. (versus +4.3 per cent. for FTSE 350).
While the Just Eat price on the day before the date of the Prosus Offer Announcement (21 October 2019) was 589 pence, in Prosus’s view there is significant further downside risk to this share price. The Just Eat Board has now acknowledged that increased investment is required and that this “may impact” profitability. This statement was made after Prosus’s Offer Announcement and is not reflected in the current Just Eat share price, which Prosus believes has decoupled from fundamentals and is currently trading on M&A speculation. In a comparable context, Grubhub has seen significant derating, and is now trading at 2.9x 2020 revenues – if Just Eat were trading at this multiple, the illustrative share price would be 526 pence to which Prosus’s Increased Offer represents an illustrative 40.7 per cent. premium (calculated by multiplying Just Eat’s consensus 2020 revenue by 2.9x and applying Just Eat’s enterprise value to equity bridge of -£31 million to get an illustrative equity value of £3,614 million, then dividing by Just Eat’s fully diluted shares of 687 million to get an illustrative share price of 526 pence per share).1
Prosus believes Takeaway.com’s claims about the lack of comparability between Just Eat’s and Grubhub’s situations are flawed and fail to appreciate the competitive dynamics the two companies are facing. Both companies are marketplace incumbents with a history of market leadership and strong profitability. Both have been disrupted by intensifying competition from well-funded and rapidly growing entrants operating an own-delivery led model. Despite attempts to defend their position by rolling out own-delivery operations both companies have continued to lose market share and experience slowing growth and decreased profitability.
2.2 Prosus’s Increased Offer takes into account significant investments required in own-delivery, product, technology and marketing
Prosus believes Just Eat has underinvested in addressing the challenges outlined above, with only £51 million invested in growth initiatives in 2018, substantially less than peers including iFood, Grubhub and Delivery Hero. Prosus believes that this underinvestment has prevented Just Eat from effectively transitioning to a hybrid model.
In Prosus’s view the 25 per cent. share of own-delivery orders that the Just Eat Board quotes masks Just Eat’s lack of traction with its own-delivery rollout as it represents a blend of Canada (acquired by Just Eat in December 2016) with 100 per cent. own-delivery and other geographies where own-delivery represented only 7.8 per cent. of orders in H1 2019. Notably, within Just Eat’s portfolio, Canada (100 per cent. own-delivery), and Brazil (>20 per cent. own-delivery) exhibit vastly superior growth compared to other assets such as UK, Spain and Italy where Just Eat is losing market share at an accelerating pace to own-delivery competitors with a superior customer proposition.
Just Eat’s track record in Australia and New Zealand starkly demonstrates how underinvestment can erode value. Just Eat acquired Menulog in May 2015 for £421 million. Prosus believes Menulog was slow to react to the intensifying competitive pressure after Deliveroo and Uber Eats entered the market, investing less than £10 million in 2018 to enhance its proposition. As a result, Menulog lost market leadership and market share and suffered declining revenue. In 2017 Just Eat incurred a £180 million impairment relating to Menulog, and current broker consensus for Menulog’s SOTP value is £104 million, 75 per cent. below the acquisition price.
This is in contrast to Brazil, where, with Prosus’s operating support and investment (in 2018, Prosus announced an additional investment commitment of US$400 million in iFood) in partnership with Just Eat, iFood has been able to swiftly react to competitive pressures, rapidly building out its own-delivery capabilities and accelerating its growth.
As consistently stated by Prosus, and now acknowledged by Just Eat’s Board, Just Eat requires increased investment, which Prosus intends to make in own-delivery, marketing, product and technology. This investment need is taken into account in the value of the Increased Offer.
2.3 Prosus’s Increased Offer provides certainty whilst the Takeaway.com Offer carries significant risks for Just Eat Shareholders
The Takeaway.com Offer carries significant risk for Just Eat Shareholders with Takeaway.com’s current share price of €86.50 marginally below its all-time high. Takeaway.com is trading at 9.9x 2020E enterprise value/revenue, two to three times the level of peers. This is in the context of Takeaway.com’s Q3 2019 order growth slowing to 15 per cent. for the Netherlands and 21 per cent. for Germany (by comparison, Prosus’s food assets are growing at 320 per cent. for Swiggy, 122 per cent. for iFood and 92 per cent. for Delivery Hero). At these valuation levels, Prosus believes that there is little room for execution missteps, further growth slowdown or increased competition.
Immediately prior to acquiring Delivery Hero’s German assets in 2018, Takeaway.com’s share price was €44.90. Prosus believes that one of the key drivers of Takeaway.com’s strong share price performance since the transaction has been an increase in the share of orders from Low Competition Markets, which has increased from 37 per cent. in the nine months to September 2018 to 65 per cent. in H1 2019. Combining with Just Eat would reduce Takeaway.com’s share of orders in Low Competition Markets to 28 per cent.,2 which is materially below pre-Germany deal levels. Prosus believes that this indicates that there is a very meaningful downside risk to the valuation of the combined entity.
The limited synergies that Takeaway.com and Just Eat have announced represent just 1.6 per cent. of the combined cost base. These limited synergies do not, in Prosus’s view, compensate for the risks outlined above. These synergies also primarily come from “operational and technology efficiency”, which Prosus believes relies on the 3 per cent. headcount reductions referenced by Takeaway.com. This is in contrast to Prosus’s focus on investment.
2.4 Takeaway.com’s playbook developed in Germany and the Netherlands would not address Just Eat’s challenges
Prosus believes that Takeaway.com takes a narrow view of the food delivery sector based principally on its experience in the Netherlands and Germany. These markets have so far been relatively insulated from innovative and well-funded global own-delivery competitors meaning Takeaway.com has limited experience of competing against own-delivery players operating at scale.
In contrast, in the UK both Uber Eats and Deliveroo have been operating at scale for years with large and growing market share and consumers have come to expect the superior selection and service quality these platforms deliver. As just one example, 20 of the Tripadvisor top 50 ranked restaurants in London are listed on Deliveroo or Uber Eats, compared to six of 50 listed on Just Eat. Prosus believes this illustrates the ability of innovative own-delivery platforms to unlock superior selection for customers, leading to increasing variety / frequency of delivery occasions and ultimately superior growth compared to underinvesting marketplace incumbents.
Prosus believes that the severe market share loss suffered by Menulog in Australia at the hands of the same two own-delivery competitors provides a cautionary tale for Just Eat in the UK and other markets. If the consumer demand for superior selection and service quality provided through the own-delivery model is not addressed, then Just Eat Shareholders may well face the same reality of meaningful market share loss and value erosion, but on a much larger scale.
Prosus does not believe Takeaway.com is well-positioned to help Just Eat address this challenge. In both Berlin and Amsterdam, Takeaway.com offers only four of the Tripadvisor top 50 restaurants on its platforms. While this marketplace-driven approach has so far worked in Takeaway.com’s markets given the absence or lack of focus of global own-delivery competitors, Prosus believes the UK situation is different and Takeaway.com’s playbook will not help address the significantly higher customer expectations in Just Eat’s markets.
2.5 Takeaway.com is not the right partner to help Just Eat transition to an own-delivery focused hybrid model
The Just Eat Board is now acknowledging that building a hybrid own-delivery / marketplace model is required for long-term success. Takeaway.com has very limited own-delivery experience and no meaningful track record, with an own-delivery order share of just 4.9 per cent. Takeaway.com’s management has repeatedly stated that it believes own-delivery to be an inferior business model that cannot be profitable, which in Prosus’s view is not true and reflects Takeaway.com’s lack of own-delivery experience and narrow view of the food delivery industry restricted to the European markets Takeaway.com operates in. Prosus is confident that the own-delivery model is profitable at scale, as shown by the performance of Swiggy, Just Eat Canada, Meituan Dianping and Wolt, which profitably operates an own-delivery model in a number of European markets.
Furthermore, Just Eat and Takeaway.com appear not to be aligned on own-delivery strategy. Just Eat plans to leverage their “world-class Skip technology and operational know-how to build own-delivery capabilities” while Takeaway.com intends to roll-out its “Scoober restaurant delivery services in the UK”. Just Eat and Takeaway.com also appear to disagree on the expected impact of such growth investments on profitability. Just Eat acknowledges the potentially negative impact on profitability, whilst Takeaway.com claims that the roll out of own delivery (Scoober) will have “no material negative impact on the bottom line”.
These contradictions demonstrate the reactive nature of Just Eat and Takeaway.com’s response to the changing dynamics in the sector raised by Prosus and represent a lack of strategic alignment and consistency, highlighting the operational execution risk attached to Takeaway.com’s offer. In contrast, Prosus has been consistent throughout in its stated strategy for Just Eat.
Prosus believes that its initial Offer to Just Eat Shareholders provided fair and certain value. The Increased Offer provides even more compelling and certain value for Just Eat’s Shareholders at a further premium to Takeaway.com’s all-share offer, which comes with significant risk.
Just Eat Shareholders are urged to accept the Increased Offer as soon as possible and, in any event, by no later than 1.00 p.m. (London time) 27 December 2019.
3. Financing of the Increased Offer
The cash consideration payable by MIH pursuant to the Increased Offer will be financed by a bridge loan agreement with J.P. Morgan Chase Bank, N.A., London Branch, BNP Paribas Fortis SA/NV, Citibank, N.A., London Branch, Citibank, N.A., Jersey Branch, Deutsche Bank Luxembourg S.A., Morgan Stanley Senior Funding, Inc. and Intesa Sanpaolo S.p.a., Filiale Frankfurt am Main as original lenders (the Original Lenders), providing for a term loan bridge facility. The proceeds of the bridge facility will be used to fund the cash consideration payable by MIH to Just Eat Shareholders in connection with the Increased Offer. Prosus has secured the fully committed bridge financing from the Original Lenders.
J.P. Morgan Cazenove, as financial adviser to Prosus and MIH, is satisfied that the resources available to MIH are sufficient to enable it to satisfy in full the cash consideration payable to Just Eat Shareholders under the terms of the Increased Offer.
4. How to accept the Increased Offer
A revised offer document (the Revised Offer Document) containing the full terms of, and conditions to, the Increased Offer together with the associated revised form of acceptance (the Revised Form of Acceptance) will be posted to Just Eat Shareholders and be made available, subject to certain restrictions relating to persons resident in Restricted Jurisdictions, on Prosus’s website at www.prosus.com/investors/justeat, in due course.
Just Eat Shareholders wishing to accept the Increased Offer in respect of certificated Just Eat Shares, should complete either (i) the Form of Acceptance accompanying the Offer Document dated 11 November 2019; or (ii) the Revised Form of Acceptance which will accompany the Revised Offer Document to be posted in due course.
Just Eat Shareholders wishing to accept the Increased Offer in respect of uncertificated shares should do so electronically through CREST.
Pursuant to the terms of the Offer, Just Eat Shareholders who have already accepted the Offer will automatically be deemed to have accepted the Increased Offer, by virtue of their prior acceptance and do not need to take any further action.
If you have any questions relating to this announcement or the Offer Document, please contact the Receiving Agent, Computershare on 0370 707 1066, (if calling within the UK) or on +44 370 707 1066 (if calling from outside the UK). Lines are open Monday to Friday 8.30 a.m. to 5.30 p.m. (London time).
Just Eat Shareholders are urged to accept the Increased Offer as soon as possible and, in any event, by no later than 1.00 p.m. (London time) on 27 December 2019.
5. Level of acceptances and disclosure of interests in relevant securities
As at 3.00 p.m. on 6 December 2019, MIH had received valid acceptances of the Offer in respect of 12,295 Just Eat Shares representing approximately 0.0018 per cent. of the current issued share capital of Just Eat, all of which may count towards the Acceptance Condition. MIH does not own any Just Eat Shares.
The percentages of Just Eat Shares referred to in this announcement are based on a figure of 682,985,7063 Just Eat Shares in issue on 6 December 2019.
The Increased Offer will be subject to the terms and conditions set out in the Revised Offer Document which will be published in due course. The Offer Document will remain available, subject to certain restrictions relating to persons resident in certain jurisdictions, on Prosus’s website at www.prosus.com/investors/justeat. The contents of Prosus’s website are not incorporated into and do not form part of this announcement.
Capitalised terms in this announcement, unless otherwise defined, have the same meanings as set out in the offer document dated 11 November 2019 in respect of the Offer.
Allen & Overy LLP is retained as legal adviser to Prosus and MIH.
Important notice related to financial advisers
J.P. Morgan Securities plc, which conducts its UK investment banking business as J.P. Morgan Cazenove (J.P. Morgan Cazenove) and which is authorised by the PRA and regulated by the FCA and the PRA in the United Kingdom, is acting as financial adviser exclusively for Prosus and MIH and no one else in connection with the Increased Offer and will not regard any other person as its client in relation to the Increased Offer and shall not be responsible to anyone other than Prosus or MIH for providing the protections afforded to clients of J.P. Morgan Cazenove, or for providing advice in relation to the Increased Offer or any matter referred to in this announcement. Neither J.P. Morgan Cazenove nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, in delict, under statute or otherwise) to any person who is not a client of J.P. Morgan Cazenove in connection with this announcement, any statement contained herein, the Increased Offer or otherwise.
Morgan Stanley & Co. International plc (Morgan Stanley), which is authorised by the PRA and regulated by the FCA and the PRA in the United Kingdom, is acting as financial adviser exclusively for Prosus and MIH and no one else in connection with the matters set out in this Increased Offer. In connection with such matters, Morgan Stanley, its affiliates and their respective directors, officers, employees and agents will not regard any other person as their client, nor will they be responsible to any other person for providing the protections afforded to their clients or for providing advice in connection with the contents of this Increased Offer or any other matter referred to herein.
This Announcement is provided for information purposes only. It is not intended to and does not constitute or form part of, an offer, invitation, inducement or the solicitation of an offer to purchase, otherwise acquire, subscribe for, exchange, sell or otherwise dispose of or exercise rights in respect of any securities, or the solicitation of any vote or approval of an offer to buy securities in any jurisdiction, pursuant to the Increased Offer or otherwise nor shall there be any sale, issuance or transfer of any securities pursuant to the Increased Offer in any jurisdiction in contravention of any applicable laws.
Eoin Ryan, Head of Investor Relations
+1 347 210 4305
Sarah Ryan, International Media Relations
Finsbury (PR adviser to Prosus)
+44 207 251 3801
J.P. Morgan Cazenove (Financial adviser to Prosus and MIH)
+44 20 7742 4000
Morgan Stanley & Co International plc (Financial adviser to Prosus and MIH)
+44 207 425 8000
Finsbury (PR adviser to Prosus)
+44 207 251 3801
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