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Just Eat seen as possible takeover target as takeaway delivery sector consolidates

The departure of Just Eat boss Peter Plumb "isn’t a surprise given how the company’s share price had lost upward momentum under his tenure, plus the business had come under attack from activist investor Cat Rock," said AJ Bell's Russ Mould

Just Eat
Just Eat has rolled out a new delivery service to fend off competition from Uber Eats and Deliveroo

Just Eat PLC (LON:JUST) is considered a possible takeover target by some analysts as the takeaway delivery sector consolidates and as the company’s shares regain ground after a disappointing year.

The online takeaway ordering firm was booted from the FTSE 100 in the last reshuffle of the index in December after its market share fell below the £4bn minimum level required to keep its spot.

READ: Just Eat says CEO to step down as it raises 2018 guidance and expects growth in 2019

Just Eat has since recovered to a market capitalisation of £4.49bn and on Monday gave investors something to look forward to as it raised its 2018 guidance for revenues and earnings and said it expects growth in 2019.For 2018, it now expects revenue of £780mln and underlying earnings (EBITDA) of £172mln to £174mln.

In 2019, revenue is expected to reach £1bn to £1.1bn and underlying EBITDA is forecast to grow to £185mln to £205mln, supported by margin expansion and the Canadian business, SkipTheDishes, delivering its first full-year profit.

The 2019 estimates exclude the Latin American arm, iFood, which is expected to report a loss of £80mln to £100mln as it invests in improving the business. 

Just Eat could offload non-core iFood business or sell itself, says Liberum 

Analysts at Liberum said they think the deconsolidation of iFood from Just Eat's estimates will raise hopes the company will sell its stake in the business to a strategic buyer, who would focus on market potential rather than losses.

Just Eat has come under pressure from US activist Cat Rock Capital to sell non-core assets, such as iFood, to help address the company’s “significant underperformance”.

Liberum also thinks there is the possibility Just Eat could become a target for buyers, given the industry’s recent merger and acquisition activity.

“There has been recent activity in the space with Takeaway.com buying the German operations of Delivery Hero and there may be hope that Just Eat may proactively sell parts of its business or that strategic buyers may look to take advantage of the changes to make a bid for Just Eat,” they said.

Two of Just Eat’s biggest competitors – Uber Eats and Deliveroo – have reportedly been considering a merger.

READ: Disrupting the disruptor: Why an Uber and Deliveroo merger could spell the end for Just Eat

Uber Eats has reportedly tabled a £1.5bn offer for Deliveroo as the two companies face increased competition in the UK from Just Eat, which has been investing heavily in its own fleet of delivery drivers and cyclists.

Previously, Just Eat was purely a takeaway ordering website and app that connected consumers with restaurants. This meant restaurants themselves had to deal with the delivery side of things.

But Just Eat has branched out to include delivery as it attempts to fend off growing competition from Uber Eats and Deliveroo.

Just Eat said on Monday that it believes it is now “strongly positioned” to take advantage of the £83bn market opportunity in takeaway food delivery this year.

“Our unrivalled marketplace reach, combined with the roll-out of our winning delivery platform, creates a unique hybrid platform which gives our growing customer base the best of both worlds through access to more choice and better service.”

CEO departure not surprising, says AJ Bell

Alongside the trading update, Just Eat announced that chief executive Peter Plumb is stepping down after less than a year-and-a-half in the role.

The company has appointed chief customer officer, Peter Duffy, as interim chief executive while it searches for a replacement for Plumb.

Plumb said the business is in “good health” and it was the right time for him to resign and make way for a new leader.

“At first glance, remarks from Plumb that now is the right time for him to step aside seem a bit odd given the short amount of time he’s been in the role,” said AJ Bell investment director.

“However, his departure isn’t a surprise given how the company’s share price had lost upward momentum under his tenure, plus the business had come under attack from activist investor Cat Rock.”

Cat Rock, which holds a 2% shareholding in Just Eat, had complained that Plumb had yet to announce a strategic plan for the business after being in the top job for more than a year and had urged the board to change “flawed metrics” on executive pay.

While there is no reference to Cat Rock in the announcement of Plumb’s departure, Mould said “one can certainly speculate the events are linked”.

Quick facts: Just Eat PLC

Price: 753 GBX

LSE:JE.
Market: LSE
Market Cap: £5.14 billion
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