Just Eat announced the sale of its 33% stake in Brazilian joint-venture iFood to Prosus N.V. affiliate MIH Movile Holdings for a consideration of €1.8 billion on Friday.
“In what seems like a never-ending battle between online takeaway firms, Just Eat Takeaway has secured itself some more firepower through the sale of a stake in Brazil’s iFood,” said AJ Bell financial analyst Danni Hewson.
The food delivery group commented the transaction would comprise €1.5 billion in cash on closing and a deferred consideration, pending the performance of the online food delivery business over the next 12 months, of up to €300 million.
Just Eat said the consideration represented an equity multiple in excess of five times the investments over the life of the joint-venture.
The company added it would retain the proceeds to strengthen its balance sheet and service repayments of its upcoming debt maturities.
“A €1.8 billion cash injection could be very helpful in terms of paying down debt and potentially marks a shift in Just Eat’s approach,” said Hewson.
“Though the value of the transaction is notably less than the €2.3 billion turned down by the company last summer when ordering food over the internet arguably reached its zenith thanks to the pandemic.”
Just Eat confirmed the transaction was scheduled to close in Q4 2022, pending shareholder approval.
GrubHub
The food delivery service said it continued to actively explore the partial or full sale of GrubHub with its advisors, however the company said there was no certainty any agreement with third parties regarding the entity would be reached, along with no projected timeline for any such agreements.
“Just Eat might have to swallow the sale of its US platform Grubhub at a similarly discounted price, not long after splashing out on a $7.3 billion deal, as it looks to concentrate on boosting its market position in Europe,” said Hewson.
“This retrenchment to a European focus makes sense when you consider how fierce the competition is on this side of the Atlantic.”
The cost of living crisis also risks biting chunks out of Just Eat’s profits, representing a tough year ahead for the delivery service as consumers cut down on expensive takeout fees.
“However, there are long-term and short-term questions about the viability of the business,” said Hewson.
“Increased costs mean the company will probably have to put up prices for delivery. But will people be prepared to pay more, particularly when cost of living pressures are becoming more acute?”
“All the while the company is facing rising costs and will have to maintain promotional spend to protect and grow its market share.”
