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Reference material – please refer to previous article on food delivery space consolidation in USA for background.
It is official – Grubhub is getting sold (not final yet). From Grubhub’s IR page
Just Eat Takeaway.com N.V. (AMS: TKWY, LSE: JET), (the “Company” or “Just Eat Takeaway.com”), and Grubhub Inc. (NYSE: GRUB) (“Grubhub”) have entered into a definitive agreement whereby the Company is to acquire 100% of the shares of Grubhub in an all-stock transaction (the “Transaction”) to create the world’s largest online food delivery company outside of China, measured by Gross Merchandise Value (“GMV”) and revenues.
My puts and takes are summarized below (no particular order)
- Takeaway and Grubhub both are founder led companies. This is a big positive over long term in terms of maintaining unit economics at EBITDA per order level rather than spending investor’s capital in empty calories.
- Even though food delivery is a local market business with local network effects, there is a lot of learning that can be shared in improving diner experience, order frequency, restaurant partnerships, delivery efficiency etc. over a long term.
- Many of these platforms are on different tech stack written long time ago in different languages. A standardized, modular (or unified) backend should result in faster product innovation over long term.
- Even though initial price seems high, final price paid will depend on closing date. Uber team deserves a mention in not getting into a bidding war and maintaining fiscal discipline (hopefully).
- Post merger, Postmates is left over as a sub scale player. It is ideal for them to find a strategic partner rather than trying to be a public company.
- Biggest near term concern is that deal doesn’t bring any scale advantage from USA market share perspective. This means battle for market share can continue longer resulting in “irrational” behavior from top 3 players. This is not ideal for DoorDash and Uber as there is no scale advantage in this deal in USA. Just Eat takeaway.com has deep pockets and I won’t be surprised if they go for market share in near term.
Only time will tell how this merger (if approved) will shape the industry. One thing is clear – food delivery war is far from over.