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Just Eat burnt by rumours of takeover talks between Uber and Deliveroo

Press Association logoPress Association 21/09/2018 By Alys Key, Press Association City Reporter
Just Eat burnt by rumours of takeover talks between Uber and Deliveroo © Provided by The Press Association Just Eat burnt by rumours of takeover talks between Uber and Deliveroo

Just Eat shares had a bite taken out of them on Friday following speculation that Uber is in early talks to buy rival Deliveroo.

Shares in FTSE 100 company Just Eat dropped as much as 9% in early trading to a low of 644.2p in response to the news.

Ride-sharing giant Uber, which has its own food delivery service, Uber Eats, could snap up Deliveroo in a bid to dominate the European market, according to Bloomberg.

While discussions are at an early stage, it is thought that Uber would need to pay well over Deliveroo’s most recent valuation of 2 billion US dollars (£1.52 billion) to take control.

Worker with Uber Eats bicycle and a bag in a street of Moscow on April 23. 2018 in Russia © Getty Worker with Uber Eats bicycle and a bag in a street of Moscow on April 23. 2018 in Russia

Paul Hickman, an analyst at Edison Investment Research, said a combination of the companies could create “a killer brand”.

“The business logic for Uber to acquire London-based Deliveroo is unassailable,” he said.

“Uber has a comprehensive app-driven distribution system and an international reputation, while Deliveroo’s business model encompasses ownership of the delivery function, unlike Just Eat which relies on restaurants’ own delivery drivers.”

A cyclist from the increasingly popular take away delivery company Deliveroo speeding through city streets with a hot food delivery from take aways and restaurants to homes. © Getty A cyclist from the increasingly popular take away delivery company Deliveroo speeding through city streets with a hot food delivery from take aways and restaurants to homes.

It is the second time Just Eat shares have taken a hit from Deliveroo news. In June, Deliveroo said restaurants on the platform would have the choice of fulfilling orders using their own drivers.

This put Deliveroo head-to-head with Just Eat’s model and caused the latter’s share price to drop by 10%.

Just Eat works with more than 29,000 restaurants in the UK, bolstering its presence last year with the £240 million acquisition of Hungry House. Deliveroo works with more than 8,000 restaurants.

The threat of competition has prompted Just Eat to spend millions developing its own delivery network, whereas it was previously only an ordering platform.

“Not having delivery capabilities looked like a huge strategic flaw, given how rivals were biting at its heels, and Just Eat’s recent decision to invest in this area was long overdue if it had any chance of fighting off the competition,” said Russ Mould, investment director at AJ Bell.

Analysts at Liberum said they would maintain a positive view on Just Eat stock even if a deal between Uber and Deliveroo goes ahead because of Just Eat’s large market share, noting: “Once you are a market leader and entrenched with customers, you are extremely hard to dislodge.”

A spokesman for Deliveroo said: “It is a matter of company of policy that we do not comment on speculation.”

Uber also declined to comment.

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