Just Eat agrees £9bn merger with Dutch rival Takeaway.com

Top story

Just Eat (JE) has agreed to merge with Dutch delivery firm Takeaway.com in an all-share deal to create a £9bn listed fast food delivery giant.

The companies confirmed this morning they have reached an agreement in principle on the key terms of a possible all-share combination of Just Eat and Takeaway.com to create Just Eat Takeaway.com. 

A statement this morning said the combination “would create one of the largest online food delivery companies in the world, with scale, strategic vision, industry leading capabilities, leading positions in attractive markets and a diversified geographic presence”.

“The Possible Combination has compelling strategic logic and represents an attractive opportunity for both companies to build on the strong individual platforms of Just Eat and Takeaway.com with the potential to deliver substantial benefits to respective shareholders, customers, employees and other stakeholders.”

Under the terms Just Eat shareholders will receive 0.09744 Takeaway.com shares in exchange for each Just Eat share, with Just Eat shareholders owning approximately 52.2% of the combined group and Takeaway.com shareholders owning 47.8%.

The proposed terms imply a value for Just Eat of 731 pence per share based on Takeaway.com’s closing share price on 26 July 2019 of €83.55, which represents a premium of 15% to Just Eat’s closing share price on 26 July 2019.

Upon completion, Mike Evans, currently the chairman of Just Eat, will assume the role of chairman of the supervisory board of the combined group, with Adriaan Nühn, currently chairman of Takeaway.com, becoming vice-chairman.

Jitse Groen, currently CEO of Takeaway.com, will assume the role of CEO of the combined group, with Paul Harrison, currently CFO of Just Eat, taking the role of CFO and Takeaway.com’s COO Jörg Gerbig remaining as COO of the merged group.

The newly merged group will be incorporated, headquartered and domiciled in Amsterdam, the Netherlands with a premium listing on the London Stock Exchange and will maintain a significant part of its operations in the United Kingdom.

The deal will create one of the world’s largest online food delivery platforms with 360 million orders worth €7.3bn in 2018.

The pair will enjoy strong leadership positions in many of the world’s largest food delivery markets, including the United Kingdom, Germany, the Netherlands and Canada.

The merger will give the businesses greater ability to leverage investments, in particular in technology, marketing and restaurant delivery services across the combined business.

Just Eat shares have jumped 23.5% on the news to 785p, yet the valuation remains significantly below their 52-week high of 889.4p

Morning update

Listed pork giant Cranswick (CWK) has announced the acquisition of Mediterranean food business Katsouris Brothers as it posts a trading update for the three months to 30 June 2019.

Cranswick has acquired the whole of the issued share capital of Katsouris Brothers, a leading processor and multi-channel supplier of Continental and Mediterranean food products.

The business operates from two facilities in Wembley, North London and employs a total workforce of approximately 250. Costas and Louis Constantinou, MD and commercial director respectively, will remain with the business.

For the year ended 30 June 2019 (unaudited), revenue for Katsouris Brothers was £68m, adjusted EBITDA was £6m and the company had gross assets of £30m.

The net cash consideration of £43.5m has been funded from Cranswick’s existing debt facilities. A further deferred contingent consideration of up to £7million in cash may become payable dependent on the future performance of the business in the 14 month period to 30 September 2020.

Meanwhile, Cranswick said trading in the first quarter of the financial year has been “encouraging”, with sales up 1.5% on strong comparatives in the same period last year.

Far East export revenues were strongly ahead of the corresponding period last year, reflecting increased demand from China following the widespread outbreak of African Swine Fever in the region.

The UK pig price increased by 10% during the period although the average price across the quarter to June 2019 was still below that in the equivalent period a year earlier.

Additionally, Cranswick continues to invest at record levels across its asset base to increase capacity, add new capability and drive further operating efficiencies, whilst maintaining industry leading standards at all its facilities.

Investment in the new £75 million poultry primary processing facility at Eye in Suffolk, which will more than double existing capacity, is progressing to plan. Commissioning is expected to take place towards the end of the financial year and is being fast-tracked to support the anchor customer for the new site (Morrisons).

Therefore, net debt increased during the period in response to the its substantial ongoing capital investment programme. However, Cranswick said it remains in a “robust financial position with committed, unsecured facilities of £160m”.

Adam Couch, CEO of Cranswick, commented: “We have made a positive start to the year and our capital investment programme, which is building a platform for future growth, remains firmly on track. We continue to make pleasing progress on the new Eye poultry facility and our new continental products facility in Bury is now performing strongly and in line with the original business case.

“I am delighted to announce the acquisition of Katsouris Brothers, a leading supplier of Continental and Mediterranean food products. This acquisition strengthens our existing continental products business and broadens our offering in a number of fast-growing, plant based, non-meat product categories.

“The family behind Katsouris Brothers has created long lasting and sustained relationships with suppliers and the business has a strong customer base. We look forward to building on this and continuing to invest in the facilities and the team, over the years ahead.”

Dutch brewer Heineken (HEIA) has posted a 5.6% rise in organic sales over the first six months of 2019, driven by a 3% rise in net revenue per hectolitre due to premiumisation and pricing and a 2.5% rise in volumes.

Consolidated beer volumes grew 3.1% organically in the first half, with growth in the second quarter easing to 2.1% despite Asia Pacific accelerating to double digit growth.

In Europe the quarter was off to a good start in April given the timing of Easter, but was later dampened by bad weather and challenging comparables.

Heineken volume increased 6.9% organically over the first half, with growth in all regions. The brand grew double digit in Brazil, Mexico, South Africa, Russia, Nigeria, UK, Portugal, Germany and Romania among others. Heineken 0.0 is now available in 51 markets and continues to gain traction.

Its international brand portfolio grew high-single digit, driven by the double digit growth of Tiger and Amstel. Cider volume rose 2.1% organically to 2.6m and volume increased double digit outside the UK, with strong growth in South Africa, Russia, Vietnam and Spain. Craft & Variety volume grew low-single digit driven by local craft propositions

Low & No-Alcohol volume increased high-single digit, delivering 6.9m hectolitres. Heineken 0.0 was a key driver of this growth and is now available in 51 markets and continues to gain traction. Some 48 of the group’s brands now have non-alcoholic line extensions.

Operating profit grew 0.3% organically, as the benefit of the strong top-line growth was largely offset by input cost inflation, higher investments in e-commerce and technology upgrades and the phasing of expenses.

Net profit decreased 1.2% organically to €1.05bn as operating profit growth was more than offset by higher income taxes.

Chairman and CEO Jean-François van Boxmeer commented: “Our strategic focus continues to be growth oriented with an ever-increasing emphasis on the sustainability of this growth, both socially and environmentally. We invest in innovation and operational excellence so our consumers enjoy our brands and we exceed our customers’ expectations, whilst seeking productivity improvements and constantly reassessing our spending behaviour.”

On the markets this morning, the FTSE 100 has opened the week up 0.8% to 7,609.4pts.

Cranswick shares are up 3.7% to 2,670p on this morning’s news, while Heineken shares are down 5.3% to €97.64

Early risers include McBride (MCB), up 6.8% to 69.4p, PayPoint, up 3.9% to 973.4p and Ocado (OCDO), up 2.7% to 1,273p.

Fallers include Premier Foods (PFD), down 2.4% to 36.1p, Hilton Food Group (HFG), down 1.3% to 939p and Devro (DVO), down 1.2% to 205.5p.

This week in the City

We have another busy week in store, albeit a little less hectic than the flurry of first half updates at home and abroad last week.

Tomorrow brings a Q3 trading update from sandwich maker and food to go operator Greencore (GNC), while high street bakery chain Greggs (GRG) will issue its interim results after a first half of strong growth. Consumer health giant Reckitt Benckiser (RB) will also post its first half results tomorrow morning.

On Wednesday, Just Eat (JE) will update the market on its first half performance after news broke of its mega-merger with Takeaway.com over the weekend and was confirmed this morning. Pig skin manufacturer Devro (DVO) will issue its interim results on Wednesday.

Thursday brings interim results from British American Tobacco (BATS).

Internationally, Tuesday will see interims from Cadbury owner Mondelez (MDLZ), tobacco giant Altria and full year results from Procter & Gamble (PG).

Kraft Heinz (KHC) will post its interim results on Wednesday after a tough first half, while Kellogg’s (K) and Weetabix owner Post Holdings will post interim results and Q3s respectively on Thursday.

In economic news, the monthly GFK consumer confidence figures will be posted on Wednesday, with the month’s PMI manufacturing figures and the Bank of England’s monthly interest rate decision coming on Thursday.