(Bloomberg) -- Wonder Group Inc. is buying Grubhub from Just Eat Takeaway.com NV for about $650 million, acquiring the restaurant delivery service at a steep discount to the $7.3 billion price tag it commanded during the early days of the Covid pandemic.
The transaction is expected to close in the first quarter of 2025, Just Eat said in a statement on its website on Wednesday. It expects net proceeds of as much as $50 million from the deal.
“The sale of Grubhub to Wonder will increase the cash generation capabilities of Just Eat Takeaway.com,” Just Eat Chief Executive Officer Jitse Groen said.
Just Eat shares jumped as much as 23% in Amsterdam on the deal, the biggest jump since August 2022 when it sold its 33% stake in Latin American joint venture iFood to Prosus NV.
Investors poured money into delivery startups during the pandemic, when customers were stuck at home due to lockdown restrictions. As interest rates rose and demand for their services fell, the industry was hit with a wave of consolidations that saw valuations drop sharply from Covid-era peaks.
Amsterdam-based Just Eat Takeaway, which bought Grubhub in 2021 in a bid to launch itself into the US food delivery market, has been looking for a way to offload Grubhub for years. It initially announced plans to sell Grubhub in April 2022, caving to investor pressure as the company struggled to fend off competition from US rivals like Uber Eats and DoorDash. In 2023, Groen said a combination of high price demands from some investors and a weak deal market meant the sale was proving “very difficult.”
Wonder will pay $142 million in cash and take on $500 million in Grubhub debt, Wonder Chief Executive Officer Marc Lore told Bloomberg News. The deal is a major step in a transformation that has been underway at the former Walmart Inc. executive’s startup since last year, when it ditched an initial plan to build a service based on a fleet of food trucks that could prepare and deliver meals to customers’ doors. Wonder launched in 2018 and began a delivery service in suburban New Jersey, before abandoning the idea in early 2023 and cutting a chunk of staff as it pivoted to storefront locations.
Lore’s startup also raised $250 million in equity investment, bringing the total amount of capital it’s secured to $1.7 billion, he said. The round was raised from new investors, according to Lore, who declined to name them or share financial terms.
The company now operates 30 storefronts, mostly around New York and Philadelphia. There is some seating for customers, but the main focus is on takeout and delivery. Various Wonder-owned brands co-exist at each location, a version of a model sometimes referred to as a “ghost kitchen.” It plans to operate 100 outlets by January 2026.
Wonder steers customers to its mobile ordering app, though its food is also available on services like Uber Eats, DoorDash and Grubhub. It will continue operating the app in its current form, while also bringing some of Grubhub’s partner restaurants onto the Wonder app, Lore said. He has no plans to sunset either the brand or Seamless, a Grubhub unit.
What Bloomberg Intelligence Says:
Just Eat Takeaway.com’s long-anticipated sale of Grubhub to Wonder Group at 6.5x EV-to-Ebitda, vs. Just Eat’s 5.8x, assumes a near-term amendment of US fee caps — which brought a €408 million Ebitda drag in 2020-22 alone. The deal delivers net proceeds of only $50 million, but bolsters Just Eat’s financial position, which is key to meeting its cash-flow goal and fending off rivals, as it cuts debt by $500 million (about $1.5 billion in convertibles through 2028 in 1H) and reduces share-based compensation costs by half.
— Diana Gomes and Tatiana Lisitsina, BI analysts
Just Eat Belated Grubhub Sale Lifts Ebit Cloud, Cuts Debt: React
There is always the potential for tension when a company that controls a platform also competes directly on that platform. But Lore said owning Grubhub will allow Wonder to avoid trying to start its own restaurants in areas where it can simply steer customers to existing Grubhub partners. “If we go into an area where there are 20 Italian restaurants, we don’t need to have a first-party Italian restaurant,” Lore said.
The deal adds another wrinkle to a long-standing history between Lore and Amazon.com Inc. Amazon bought Lore’s startup Diapers.com in a 2010 deal before shutting it down. Lore then started Jet.com, a direct competitor that became a crucial part of Walmart’s strategy to compete with Amazon when he sold it to the retailer for $3.3 billion. For over two years, Amazon Prime members have received free Grubhub deliveries through a deal in which Amazon received an equity stake in the company. Wonder will take over that stake, but plans to continue the Amazon partnership.
The final selling price of Grubhub reflects the US-based company’s poor performance in recent years. Grubhub has steadily contracted since getting acquired, in part because Just Eat cut spending on marketing to stem its losses. The Wall Street Journal reported on Nov. 12 that the companies were close to a deal.
In 2022, Just Eat wrote down the value of Grubhub by €3 billion amid plunging stock market valuations and rising interest rates. Last year, the company was finding it difficult to complete the sale because of a combination of high price demands from some investors and a weak market for deals, Groen said in a Bloomberg interview.
The transaction does not impact Just Eat Takeaway’s guidance for 2024, the company said.
(Updates with Wonder funding round in eighth paragraph.)
