Deutsche Bank expects Just Eat PLC’s (LON:JE.) £240mln acquisition of fellow online takeaway service Hungryhouse to get the go-ahead from regulators when they report back later this year.
Back in May, the Competition and Markets Authority said it would be stepping up its inquiry into the deal – which was announced last December – over fears that restaurants could end up worse off.
Investors have fretted over whether or not the CMA will approve the deal and what remedies it might enforce on Just Eat in order to give the acquisition its blessing.
“We think that concerns are overdone and expect the deal to be eventually approved,” DB analysts said in a note this morning.
Hungryhouse won’t have a significant effect on Just Eat’s market share
It pointed to the fact that Just Eat already has an 82% share of the market in terms of takeaways signed up to its service. This figure would only rise to 85% if the Hungryhouse acquisition gained approval, which the analysts don’t think poses too much of a problem.
It compared that number to the likes of Rightmove Plc (LON:RMV) and Auto Trader Group PLC (LON:AUTO) which have market penetration of 91% and 80% respectively.
“We think this is a feature of the market rather than a failure of competition,” the analyst added.
“The online classified market is driven by network effects, where it is in the best interest of both sides of the transaction to use the most liquid marketplace.”
Similarly, Just Eat only has a 25% share of the market in terms of number of orders (most are still made by phone), and that percentage would only rise to 27% if you bolted on Hungryhouse as well.
Buy into first half results, say analysts
Deutsche has repeated its ‘buy’ rating heading into the online takeaway platform’s first half results which are due out next month.
The bank is forecasting group revenue for the period of £234mln and underlying earnings (EBITDA) of £77mln, up 36% and 44% year-on-year.
On top of the ‘buy’ rating, DB has upped its price target by 8% to 785p (from 725p) on the back of hi8gher peer multiples.
Just Eat shares were up 1.3%, or 9p, to 674p in early afternoon trading.