Cat Rock Capital Issues Presentation on Just Eat Takeaway.com Merger with Grubhub
Cat Rock Capital Management LP (together with its affiliates, “Cat Rock Capital”), a long-term oriented investment firm and beneficial owner of approximately 6.8 million shares of the common stock of Just Eat Takeaway.com NV (“Just Eat Takeaway.com”, “JET”, or the “Company”) (LSE: JET), representing circa 4.5% of Just Eat Takeaway.com’s outstanding shares, today released a public presentation on the Just Eat Takeaway.com offer for Grubhub Inc. (“Grubhub”). This presentation can be found at JustEatDoesDeliver.com and is also available upon request via email@example.com .
Alex Captain, Founder and Managing Partner, Cat Rock Capital Management LP, commented:
“Cat Rock has been a shareholder of Just Eat Takeaway.com NV (“JET” or “the Company”) and its predecessor companies for over three years, and our firm has intensively researched the global online food delivery sector for over five years. We have developed a great respect for CEO Jitse Groen, his team, and his strategy over that time. Today, we are one of JET’s largest holders with 6.8 million shares (~4.5% of outstanding stock) and remain deeply committed to the Company’s long-term success.
“We have conducted a substantial amount of research on Just Eat Takeaway.com’s proposed acquisition of Grubhub Inc. (“Grubhub”), and we wanted to share this work with fellow shareholders in advance of the shareholder vote on this transaction. The Cat Rock presentation is available at: JustEatDoesDeliver.com .
“We believe Just Eat Takeaway.com is a special company in the global online food delivery sector because of its hybrid model and clear market leadership positions. The hybrid model allows JET to offer consumers better selection and lower fees than its competitors while still achieving dramatically better economics. JET commands this privileged position because it is the clear market leader in countries representing over 90% of its Gross Merchandize Value (“GMV”), creating strong network effects steadily built over the past two decades.
“Logistics-based competitors like Uber, Deliveroo, DoorDash, and Postmates emerged in the mid-2010s and expanded the market by offering new selection to consumers, including quick-service restaurants, restaurants traditionally focused on dine-in customers, and restaurants in suburban areas previously lacking delivery. The economics of these new categories were substantially worse than those of the established business in high-density urban markets with a delivery culture. The new logistics-based competitors were therefore forced to heavily subsidize their offering using promotions, unsustainably low delivery fees, and unsustainably low commissions.
“Just Eat and Grubhub initially prioritized short-term profits, responding slowly and incompletely to the new logistics-based competitors. By contrast, Takeaway.com prioritized its consumer proposition and market leadership, aggressively offering logistics with no delivery fee and providing consumers with a clearly superior value proposition. Notably, Takeaway.com successfully grew profits while investing aggressively, underscoring the strength of a scaled hybrid model when well-executed.
“Just Eat and Grubhub maintained their significant scale and selection advantages in their core markets despite their delay in matching the selection of their new competitors. Today, Takeaway.com is applying its proven strategy to Just Eat: i) offer the best consumer proposition, ii) prioritize market leadership, and iii) focus on the details of execution. We believe this strategy will extend Just Eat Takeaway.com’s lead over competitors and generate large long-term profits.
“ We strongly support Just Eat Takeaway.com’s acquisition of Grubhub for three reasons:
- Growth: Just Eat Takeaway.com increases its addressable market by ~100%, adding to the Company’s already substantial runway for growth.(1)
- Profits: Just Eat Takeaway.com increases its revenue by ~70% while increasing its share count by only ~40%, even as Grubhub grows GMV ~60% (close to 90% excluding B2B and Manhattan B2C customers).(2)
- Strategy: Just Eat Takeaway.com further hampers the global ambitions and viability of logistics-based competitors through this acquisition.
“Grubhub has a significant structural competitive advantage in its core markets in New York and other primarily Northeastern US cities that share many characteristics with European markets (high population density, established delivery culture, and a significant selection of independent restaurants) – the hybrid model offers consumers the best selection and pricing, while providing Grubhub with the scale and resources to invest aggressively in logistics.
“Grubhub can also invest in the massive greenfield online food delivery opportunity outside of its core markets. These markets have low penetration and remain open to new entrants, while Grubhub’s core markets have much higher penetration and therefore offer little opportunity for new entrants to win market leadership. SkipTheDishes has proven that logistics can be a viable business in North America outside of dense urban areas.
“Just Eat Takeaway.com has the opportunity to become the Meituan of the entire western world through the Grubhub acquisition. Meituan is currently valued at ~$175 billion (almost 8x JET’s value even after acquiring Grubhub), and JET’s markets will have more than 3x the GDP of China.(3)
“Overall, we believe both Just Eat Takeaway.com and Grubhub are significantly undervalued and deeply misunderstood. In the near-term, Just Eat Takeaway.com and Grubhub could generate a 100% one-year return if the combined company’s revenue multiple returns to historical levels of 7.5x and revenue grows 25% over the next year.(4)
“Longer-term, Just Eat Takeaway.com can increase its revenue by 10x if population penetration reaches 35% (vs. 33% in the Netherlands today) and order frequency reaches 2.5x per month (consistent with current levels elsewhere and a small fraction of 90 total meals per month).(5)
“We think the combined company has very attractive prospects and offers uniquely compelling short-term and long-term returns to investors.
“We welcome interested investors to review our research at JustEatDoesDeliver.com . We would also be happy to connect with other Just Eat Takeaway.com shareholders who reach out to us at firstname.lastname@example.org .”
Cat Rock’s previously released research and public commentary can also be found at JustEatDoesDeliver.com .
White & Case LLP serves as legal advisor to Cat Rock Capital Management LP.
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.
(1) Euromonitor International, Consumer Foodservice Industry, Total Restaurant Spend (2019); excluding Brazil and Mexico.
(2) Just Eat Takeaway.com 1H 2020 semi-annual report dated 12 August 2020; Grubhub FY19 annual report dated 28 February 2020; Just Eat Takeaway.com shareholder circular published in connection with its combination with Gruhub on 25 August 2020; Grubhub Q2 2020 Shareholder Letter.
(3) S&P Capital IQ as of 24 September 2020; The World Bank (2019).
(4) S&P Capital IQ as of 24 September 2020; Cat Rock Capital estimates.
(5) Cat Rock Capital estimates.
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. 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. 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. 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.JustEatDoesDeliver.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 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. Any historic financial information, projections, estimates, forecasts, targets, prospects or returns contained herein are not necessarily a reliable indicator of future performance. Nothing in these materials should be relied upon as a promise or representation as to the future.
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. This announcement does not address the merits of the transaction from the point of view of stockholders of Grubhub Inc..
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 deck 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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