Cat Rock Capital Sends Letter to Just Eat Takeaway.com (“JET”) Board Urging Sale or Spin-Off of Grubhub by End of 2021
JET Management Has Failed to Fix Deep and Damaging Undervaluation of Equity
JET Stock Price Embeds Significant Negative Value for Grubhub Despite $10 billion of GMV
Cat Rock Urges Immediate Action to Unlock Grubhub Value via Sale or Spin-Off
October 25, 2021 04:00 AM Eastern Daylight Time
GREENWICH, Conn.--(BUSINESS WIRE)--Cat Rock Capital Management LP (together with its affiliates, “Cat Rock Capital”), a long-term oriented investment firm and holder of approximately 13.8 million shares in the capital of Just Eat Takeaway.com NV (“Just Eat Takeaway.com”, “JET”, or “the Company”) (LSE: JET, AMS: TKWY, NASDAQ: GRUB), representing circa 6.5% of Just Eat Takeaway.com’s outstanding shares, today sent a letter to the JET Management Board. Cat Rock urges the announcement of a sale or spin-off of Grubhub by 31 December 2021 to refocus JET’s business and address the deep and damaging undervaluation of the Company’s equity. This letter is included below and is also available at JustEatMustDeliver.com.
Alex Captain, Founder and Managing Partner, Cat Rock Capital Management LP, commented:
“We were pleased to see Just Eat Takeaway.com present a clear, data-driven vision for its business at the recent Capital Markets Day. Moreover, we were encouraged to hear that JET management views consolidation in the US market as “inevitable” and that they intend to participate.
“However, JET management failed to fix the deep and damaging undervaluation of its equity by taking tangible action to unlock the value of its portfolio. In fact, the Capital Markets Day only highlighted the magnitude of the problem – today, JET trades at less than 8x 2022 normalized EBITDA based on management’s long-term margin guidance.
“A deeply depressed stock price poses a real risk to JET’s business, limiting its financial and strategic flexibility, inviting competitors to invest in its markets, and leaving the Company vulnerable to takeover bids well below its long-term intrinsic value. JET must take substantive and immediate action to solve this valuation problem.
“Fortunately, JET management has an obvious and actionable lever to quickly solve its valuation problem and refocus its business – selling or spinning-off Grubhub. JET’s stock appreciated +329% from its 2016 IPO to the day before the Grubhub acquisition announcement in June 2020, dramatically outperforming the market. Since announcing the Grubhub purchase just 16 months ago, JET stock has underperformed the MSCI World Index by a remarkable 69%.
“Assuming equity performance consistent with the MSCI World Index, JET’s current valuation embeds negative €14 billion of value for acquiring Grubhub, vastly exceeding the €6.5 billion purchase price for the asset. We believe a Grubhub sale or spin-off at any positive valuation could drive over 100% appreciation in JET’s stock as it returned to its historical rating.
“We believe Grubhub is being capitalized at a significant negative value in JET’s stock price because the acquisition reduced JET’s financial flexibility, distracted the Company, and led investors to question management’s judgement and motivations.
“Nevertheless, the market is undoubtedly wrong to attribute negative value to Grubhub, which has $10 billion of GMV, over 300,000 restaurant partners, coverage of over 4,000 US cities, and a same-day logistics network that delivers 68% of its orders.
“Moreover, Grubhub is the only credible path for US online grocery businesses such as Amazon, Walmart, and Instacart to match the converged online food and online grocery offerings of DoorDash and UberEats. There is no question that a combined online food delivery and grocery app offers a far better consumer proposition than either service alone.
“For example, a partial or complete Grubhub sale to Amazon Whole Foods at any valuation would significantly improve the consumer proposition for both companies and dramatically increase competition in the US online food delivery market by providing Grubhub with the resources to credibly compete against the massive, converged US businesses of DoorDash and UberEats.
“The industrial and financial logic for a Grubhub sale or spin-off as a precursor to a sale could not be clearer. Moreover, JET management must act quickly – an extended period of strategic uncertainty or an unnecessary integration will hurt both JET and Grubhub.
“We have supported Jitse Groen and his management team for over four years as shareholders of JET and its predecessor companies. We believe they are clever, aligned, and entrepreneurial operators, and we do not believe that they will seek to save face instead of taking decisive action to improve the business.
“The rationale for a sale or spin-off of Grubhub is obvious and urgent. Further, a spin-off is entirely under JET management’s control. If JET management fails to pull this lever by 31 December 2021, it will be clear to us and other shareholders that JET management cannot move quickly and decisively enough to compete in a fast-paced sector such as online food delivery.
“JET is the future of same-day delivery in Europe, with the continent’s largest and fastest-growing logistics network and a collection of unassailable #1 positions. We could not be more excited about the Company’s prospects and look forward to quick and tangible action to solve its significant valuation problem.”
The full text of Cat Rock’s letter is included below and is also available at the following website: JustEatMustDeliver.com.
LETTER TO THE JUST EAT TAKEAWAY.COM MANAGEMENT BOARD