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
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
25 October 2021
Management Board Just Eat Takeaway.com NV Oosterdoksstraat 80
1011 DK Amsterdam The Netherlands
Jitse and Other Members of the Management Board:
As you know, Cat Rock Capital Management LP (together with its
affiliates, “Cat Rock” or “we”) is a long-term supporter and
shareholder of Just Eat Takeaway.com NV (“JET” or “the Company”),
which we believe is a high-quality business with significant growth
potential. Cat Rock holds approximately 13.8 million shares in the
capital of JET, representing approximately 6.5% of JET’s
outstanding shares, and has been a shareholder of JET and its
predecessor companies for over four years.
Cat Rock has no other investments in the online food delivery
space. We have been deeply and passionately committed to the
success of JET over the past four years, and the Company is our
largest investment.
JET Capital Markets Day
We were pleased to see management present a clear, data-driven
vision for the business at its recent Capital Markets Day. This
event was an important step towards improving JET’s communication
with investors.
We were also encouraged by management’s view that US
consolidation is “inevitable” and that it “expects to be involved
in this consolidation.”
However, we were deeply disappointed by the lack of tangible
progress on asset sales or a formal commitment to near-term
strategic action to unlock Grubhub’s value.
The Capital Markets Day did not solve the problem of JET’s
deeply depressed valuation or broken trust with the public markets.
Instead, this event only highlighted the magnitude of the
issue.
Today, JET trades at less than 8x 2022
normalized EBITDA using Company guidance for 2022 GTV and
the low-end of its long-term margin target.(1) Assuming a trading
multiple of 15x normalized EBITDA, JET’s five-year GTV guidance
implies a 30% annual return over the next four years, suggesting an
incredibly undervalued current price.(2)
Valuation Problem
JET’s deeply depressed valuation has real consequences for the
Company, its investors, and its other stakeholders:
1) Capital: JET’s deeply depressed
valuation limits its ability to raise capital on attractive terms,
hampering its strategic flexibility and its ability to invest for
growth.
2) Competition: JET’s weak standing
in the public markets invites competitors to continue aggressively
investing in the Company’s markets.
3) Longevity: JET’s low valuation
leaves it vulnerable to takeover bids significantly below its
intrinsic value, permanently impairing returns for existing
investors.
Clearly, JET must take urgent action to re-establish its
credibility with the public markets.
Grubhub’s Negative Implied Value
JET’s persistent equity underperformance over the past two years
has a clear culprit – the decision to acquire Grubhub in June
2020.
JET and its predecessor Takeaway.com had dramatically
outperformed the market for four years prior to the Grubhub
acquisition, delivering a 48% return since its 2016 IPO versus 10%
for the MSCI World Index.(3)
However, JET’s outperformance evaporated when it announced the
Grubhub acquisition in June 2020, with the stock falling over 18%
in the four trading days after the announcement.(4) Unbelievably,
JET stock has underperformed the MSCI World Index by 69% in the
sixteen months since announcing the Grubhub acquisition.(5)
Assuming equity performance consistent with the MSCI World
Index, JET’s current valuation embeds negative €14 billion of enterprise value for acquiring
Grubhub, vastly exceeding the €6.5 billion purchase price
for the asset.(6)
Make no mistake – we believe that the market is undoubtedly
wrong when it attributes a large negative value to Grubhub, which
is generating $10 billion of GMV across 4,000 cities with over
300,000 restaurant partners.(7)
Nevertheless, the Grubhub acquisition raised legitimate concerns
among investors because the acquisition diluted JET’s collection of
#1 market positions, slowed its growth rate, reduced its focus on
its European core, distracted management, jeopardized its financial
flexibility, and, most importantly, caused investors to question
JET management’s judgement and motivations.
Grubhub is the root cause of the public market’s loss of
confidence in JET, and it offers a compelling solution.
Path Forward
JET has a clear path to solving its valuation problem –
unlocking the value of Grubhub.
Despite the market’s negative view, Grubhub has over $10 billion
of run-rate GMV, coverage of over 4,000 cities across the US, and a
robust logistics network that delivers 68% of its total orders.(8)
Grubhub’s sticky customers have attractive unit economics, and its
brand has a similar size to UberEats in the United States based on
Google Trends.(9)
Moreover, Grubhub has significant strategic value because of the
convergence of online food delivery and online grocery. Grubhub
represents the only credible opportunity for large US online
grocery players such as Amazon, Walmart, or Instacart to provide a
competitive converged offering. The success of DoorDash, Deliveroo,
Delivery Hero, and Uber in entering online grocery underscores the
strategic necessity of a converged consumer proposition.
The path forward for JET is therefore very
clear – JET must unlock the value of Grubhub through a sale or
spin-off of the business this year. A sale or spin-off of
Grubhub could immediately drive a >100% re-rating of JET stock,
even if Grubhub is valued at a significant discount to JET’s €6.5
billion purchase price.(10)
Timing
JET and Grubhub will suffer from an extended period of strategic
uncertainty or from pursuing an unnecessary and costly integration
process. Moreover, JET urgently needs to solve its valuation
problem to regain financial and strategic flexibility and mitigate
the risk of low-ball bids for the Company.
It is imperative that JET management immediately commit to unlocking the value of
Grubhub through a sale, or, if necessary, through a spin-off that
could be an effective precursor to a future sale.
Conclusion
JET is the future of same-day delivery in Europe – it operates
the largest and fastest-growing
same-day logistics network on the continent. The Company has an
almost unlimited addressable market and will grow rapidly for the
foreseeable future. JET is the market-leader in markets
representing over 90% of its GMV excluding Grubhub and operates a
unique 1P/3P model that is the proven long-term winner across
e-commerce markets (e.g., Amazon, Alibaba, MercadoLibre, iFood,
Delivery Hero).(11)
JET management’s communication issues and the Grubhub
acquisition have led to an almost unbelievable undervaluation of
the Company’s equity, which introduces real and tangible risks to
the business.
JET management had a strong reputation for effective execution
and clever capital allocation prior to Grubhub, and it can regain
this reputation by unlocking the value of Grubhub before the end of
2021.
A spin-off of 40% - 100% of Grubhub is
entirely under JET management’s control. We believe JET must
announce such a Grubhub spin-off by 31 December 2021 if it cannot
reach terms on a sale before then.
The case for a Grubhub sale or spin-off is obvious and urgent.
If JET management fails to act on either option before the end of
the year, we and other investors will justifiably question whether
this team has the capacity for effective capital allocation or
management of a public company, and we intend to take additional
action to help JET realize its great potential.
We truly believe that the constructive steps we outline here are
in the best interest of the Company and its shareholders. As
always, we would welcome the opportunity to discuss these views
with you to achieve the best outcome for Just Eat Takeaway.com.
Best Regards,
Alex Captain Founder and Managing Partner Cat Rock Capital
Management LP
White & Case LLP and Loyens & Loeff N.V. serve as legal
advisor to Cat Rock Capital.
About Cat Rock Capital Management LP
Cat Rock Capital Management LP is a long-term focused investment
firm that manages capital on behalf of pension funds, endowments,
foundations, and other institutional investors. It seeks to invest
in a select number of high-quality companies, with a long-term
approach that emphasizes deep fundamental research. Cat Rock
Capital is based in Connecticut, USA and was founded in 2015 by
Alex Captain.
Notes
(1) According to CRC estimates; share price and capitalization
according to S&P Capital IQ, as of 22 October 2021; EBITDA
reflects Adjusted EBITDA, based on the Company’s FY22 GTV guidance
and the low-end of the Company’s long-term Adjusted EBITDA / GTV
margin target, both provided at the Company’s Capital Markets Day
on 21 October 2021; GTV represents Gross Transaction Value, as
defined by the Company.
(2) According to CRC estimates; based on €59bn of GTV in FY26, a
5% Adjusted EBITDA / GTV margin, a 15x TEV / EBITDA multiple,
€2.3bn of value for the Company’s stake in iFood, and a share price
and capitalization according to S&P Capital IQ, as of 22
October 2022; annual return based on the annualized percent change
between the Company’s share price as of 22 October 2021 and the
CRC-estimated equity value per share as of 31 December 2025,
excludes cash flow generation between 1H21 and FY25; GTV represents
Gross Transaction Value, as defined by the Company; FY26 GTV
estimate based on the mid-point of the Company’s FY21 GTV guidance
and guidance for the Company to add an incremental €30bn of annual
GTV over the next 5 years, as per guidance provided at the
Company’s Capital Markets Day on 21 October 2021; FY26 Adjusted
EBITDA / GTV margin reflects the low-end of the Company’s long-term
target.
(3) According to S&P Capital IQ, as of 22 October 2021; JET
return based on IPO price of €23/share; MSCI World Index return
reflects the total return, net of dividends, for the MSCI World
Index (EUR).
(4) According to S&P Capital IQ, as of 15 June 2021.
(5) According to S&P Capital IQ, as of 22 October 2021; MSCI
World Index return reflects the total return, net of dividends, for
the MSCI World Index (EUR).
(6) According to CRC estimates; represents the difference
between the Company’s current enterprise value and its enterprise
value assuming its share price, as of 9 June 2020, performed
in-line with the MSCI World Index (EUR) through 22 October 2021;
enterprise value based on share price according to S&P Capital
IQ, as of 22 October 2021; enterprise value on 9 June 2020 based on
pro forma share count, adjusted for shares issued as part of the
Grubhub acquisition; amount paid for Grubhub according to Company
press release titled, “Just Eat Takeaway.com to combine with
Grubhub to create a leading global online food delivery player,”
published on 10 June 2020, purchase price converted from USD to EUR
based on FX rate according to S&P Capital IQ, as of 9 June
2020.
(7) GMV and restaurant count according to the Company’s Capital
Markets Day presentation published on 21 October 2021; city
coverage according to the Company’s June 2021 Company Update
presentation; GMV represents GTV, or Gross Transaction Value, as
defined by the Company.
(8) GMV according to the Company’s Capital Markets Day
presentation published on 21 October 2021; city coverage according
to the Company’s June 2021 Company Update presentation; GMV
represents GTV, or Gross Transaction Value, as defined by the
Company; percentage of orders delivered by Grubhub according to the
Company’s Q3 2021 Trading Update published on 13 October 2021.
(9) According to Google Trends, based on searches for “Grubhub”
and “Uber Eats” over the past 12 months.
(10) According to CRC estimates; potential upside based on a
sum-of-the-parts valuation that values Grubhub at €3.0bn, iFood at
€2.3bn, and the ex-Grubhub business at €27.7bn based on FY22 JET
GTV and a TEV / GTV multiple of 1.2x, in-line with JET’s TEV / NTM
GMV multiple on 9 June 2020, the day before the Grubhub acquisition
was announced; total FY22 GTV based on the mid-point of the
Company’s FY21 GTV guidance and the Company’s guidance for
mid-teens GTV growth in FY22, as per the Company’s Capital Markets
Day presentation published on 21 October 2021, Grubhub GTV based on
consensus according to Visible Alpha on 22 October 2021, ex-Grubhub
GTV based on the difference between total GTV and Grubhub GTV; TEV
/ GTV multiple of JET on 9 June 2020 based on consensus blended
forward GMV according to Visible Alpha, TEV according to S&P
Capital IQ, TEV adjusted for the value of iFood, iFood value based
on average of iFood valuation estimates from J.P. Morgan (4/24/20),
Goldman Sachs (5/11/20), Morgan Stanley (7/2/20), Numis (7/9/20),
and Jefferies (8/3/20).
(11) According to the Company’s June 2021 Company Update
presentation.
DISCLAIMER
Cat Rock Capital Management LP and certain of its affiliates and
controlling persons (collectively, “Cat Rock Capital”), is
publishing this announcement solely for the information of other
shareholders in Just Eat Takeaway.com NV (“Just Eat Takeaway.com”).
This announcement is not intended to be and does not constitute or
contain any investment recommendation as defined by Regulation (EU)
No 596/2014 (as it forms part of the domestic law in the United
Kingdom by virtue of the European Union (Withdrawal) Act 2018). No
information in this announcement should be construed as
recommending or suggesting an investment strategy. Nothing in this
announcement or in any related materials is a statement of or
indicates or implies any specific or probable value outcome in any
particular circumstance. This announcement is provided merely for
general informational purposes and is not intended to be, nor
should it be construed as (1) investment, financial, tax or legal
advice, or (2) a recommendation to buy, sell or hold any security
or other investment, or to pursue any investment style or strategy.
Neither the information nor any opinion contained in this
announcement constitutes an inducement or offer to purchase or sell
or a solicitation of an offer to purchase or sell any securities or
other investments in Just Eat Takeaway.com or any other company by
Cat Rock Capital or any fund or other entity managed directly or
indirectly by Cat Rock Capital in any jurisdiction. This
announcement does not consider the investment objective, financial
situation, suitability or the particular need or circumstances of
any specific individual who may access or review this announcement
and may not be taken as advice on the merits of any investment
decision. This announcement is not intended to provide the sole
basis for evaluation of, and does not purport to contain all
information that may be required with respect to, any potential
investment in the Company. Any person who is in any doubt about the
matters to which this announcement relates should consult an
authorised financial adviser or other person authorised under the
UK Financial Services and Markets Act 2000. To the best of Cat Rock
Capital’s ability and belief, all information contained herein is
accurate and reliable, and has been obtained from public sources
that Cat Rock Capital believes to be accurate and reliable.
However, such information is presented “as is”, without warranty of
any kind, whether express or implied, and Cat Rock Capital has not
independently verified the data contained therein. All expressions
of opinion are subject to change without notice, and Cat Rock
Capital does not undertake to update or supplement any of the
information, analysis and opinion contained herein. This
announcement, and its content, distribution and use, is subject to
the terms specified at www.JustEatMustDeliver.com.
FORWARD LOOKING STATEMENTS
This announcement contains certain forward-looking statements
and information that are based on Cat Rock Capital’s beliefs, as
well as assumptions made by, and information currently available
to, Cat Rock Capital. These statements include, but are not limited
to, statements about strategies, plans, objectives, expectations,
intentions, expenditures and assumptions and other statements that
are not historical facts. When used herein, words such as
“anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan” and
“project” and similar expressions (or their negative) are intended
to identify forward-looking statements. These statements reflect
our current views with respect to future events, are not guarantees
of future performance and involve risks and uncertainties that are
difficult to predict. Further, certain forward-looking statements
are based upon assumptions as to future events that may not prove
to be accurate. Actual results, performance or achievements may
vary materially and adversely from those described herein. There is
no assurance or guarantee with respect to the prices at which any
securities of Just Eat Takeaway.com or any other company will
trade, and such securities may not trade at prices that may be
implied herein. Any estimates, projections or potential impact of
the opportunities identified by Cat Rock Capital herein are based
on assumptions that Cat Rock Capital believes to be reasonable as
of the date hereof, but there can be no assurance or guarantee that
actual results or performance will not differ, and such differences
may be material and adverse. No representation or warranty, express
or implied, is given by Cat Rock Capital or any of its officers,
employees or agents as to the achievement or reasonableness of, and
no reliance should be placed on, any projections, estimates,
forecasts, targets, prospects or returns contained herein. Neither
Cat Rock Capital nor any of its directors, officers, employees,
advisers or representatives shall have any liability whatsoever
(for negligence or misrepresentation or in tort or under contract
or otherwise) for any loss howsoever arising from any use of
information presented in this announcement or otherwise arising in
connection with this announcement. Any historical financial
information, projections, estimates, forecasts, targets, prospects
or returns contained herein are not necessarily a reliable
indicator of future performance. Nothing in this announcement
should be relied upon as a promise or representation as to the
future. Nothing in this announcement should be considered as a
profit forecast.
PERMITTED RECIPIENTS
In relation to the United Kingdom, this announcement is being
issued only to, and is directed only at, (i) investment
professionals specified in Article 19(5) of the Financial Services
and Markets Act 2000 (Financial Promotion) Order 2005 as amended
(the “Order”), (ii) high net worth entities, and other persons to
whom it may lawfully be communicated, falling within Article
49(2)(a) to (d) of the Order and (iii) persons to whom an
invitation or inducement to engage in investment activity (within
the meaning of section 21 of the Financial Services and Markets Act
2000) in connection with the issue or sale of any securities of
Just Eat or any member of its group may otherwise lawfully be
communicated or caused to be communicated (all such persons
together being referred to as “Permitted Recipients”). Persons who
are not Permitted Recipients must not act or rely on the
information contained in this announcement.
DISTRIBUTION
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. The distribution of this announcement in certain
countries may be restricted by law and persons who access it are
required to inform themselves and to comply with any such
restrictions. Cat Rock Capital disclaims all responsibility where
persons access this announcement in breach of any law or regulation
in the country of which that person is a citizen or in which that
person is residing or is domiciled. Cat Rock Capital is subject to
supervision by, and registered with, the U.S. Securities and
Exchange Commission.
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version on businesswire.com: https://www.businesswire.com/news/home/20211025005332/en/
Investor Contact Cat Rock Capital +1 (203) 992-4630
info@catrockcap.com
Media Contact Kepler Communications Charlotte Balbirnie
+44 (0) 7989 528421 CBalbirnie@keplercomms.com
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