Online food delivery company Just Eat has agreed to buy rivals hungryhouse in Britain and SkipTheDishes in Canada, spending more than US$300 million to strengthen its leading position in both markets.
The London-listed firm said it would pay an initial 200 million pounds (US$251 million) to buy hungryhouse from Delivery Hero, a Berlin-based company backed by Rocket Internet, plus 40 million pounds based on performance.
Hungryhouse is an online food company operating solely in Britain. Just Eat said the deal was expected to boost its earnings per share (EPS) in the first full year of ownership.
In Canada, Just Eat said it would pay an initial $110 million (US$66 million) for SkipTheDishes, a delivery service focused on lower density metropolitan and suburban areas which has 2,900 restaurants listed and 350,000 active customers.
Just Eat said it expected the deal, net of one-off exceptional costs, to moderately weigh on EPS in 2017 and 2018 before boosting earnings thereafter.
Shares in Just Eat, which listed in 2014, rose to a new high of 623.5 pence on Thursday after the deals were announced and were 2.3 percent higher at 611 pence at 0905 GMT.
Chief Executive David Buttress said the two transactions would help the company build its presence in two key markets.
He said he was confident the British deal would be approved by competition authorities, despite analysts saying the deal would bring together the first and second ranked players.
“We think this brings benefits to both restaurants and consumers rather than diminishing them,” he said.
Jefferies analyst David Reynolds, who has a “buy” rating on the company, said the British deal “made absolute sense” strategically and was “reasonably priced”, with the price representing about 16 times expected 2017 core earnings.
“Whilst it may be some time before the CMA (Competition and Markets Authority) bless this deal, the strategic imperative for Just Eat makes sense, the consideration seems reasonable and we do not underestimate the importance of Just Eat taking hungryhouse off the table,” he said.
Update: Based in Winnipeg, SkipTheDishes was founded in 2013. It was venture-backed, raising a seed round in June 2015 from Canadian investors Golden Venture Partners and Two Small Fish Ventures.
By Paul Sandle (London)
(Editing by David Clarke)
(This story has been edited by Kirk Falconer, editor of PE Hub Canada)
Photo courtesy of Joey’s Restaurants