Sales of Takeaway.com Stock by Prosus Portfolio Company Undermining Just Eat Sale Process
Analysis Suggests Takeaway.com Merger Could Deliver 1,200p of Value by the End of 2020
Just Eat Board and Authorities Must Consider All Options for Restoring Integrity of Sale Process
GREENWICH, Conn.–(BUSINESS WIRE)–Cat Rock Capital Management LP (together with its affiliates, “Cat Rock Capital” or “Cat Rock”), a long-term oriented investment firm and beneficial owner of approximately 17.7 million shares of the common stock of Just Eat plc (“Just Eat” or the “Company”) (LSE: JE), representing circa 3% of Just Eat’s outstanding shares(1), today issued the following statement regarding the proposed offers for Just Eat from Prosus N.V. (“Prosus”) and Takeaway.com N.V. (“Takeaway.com”):
Just Eat shareholders are being directly and materially harmed by Delivery Hero’s sustained selling program in Takeaway.com stock, which is undermining the value of Takeaway.com’s bid for Just Eat.
Delivery Hero acknowledges it is a concert party with Prosus(2), and it initiated a major open-market share sale of Takeaway.com stock only 11 days before Prosus signed a Non-Disclosure Agreement (“NDA”) with Just Eat in order to compete against Takeaway.com’s bid. Delivery Hero structured its share sales in a bizarre and uneconomic fashion that seems deliberately intended to depress Takeaway.com’s stock price in the run-up to the shareholder vote on a merger with Just Eat:
- Discount: Delivery Hero announced a minimum price 13% below Takeaway.com’s trading price with no obvious economic justification for the size of the discount. Five prior placements of Takeaway.com stock had only required 2% to 7% discounts (including one done by Delivery Hero itself)(3), suggesting that the 13% discount was designed to maximize the negative impact on Takeaway.com stock.
- Duration: Delivery Hero limited off-market blocks to 100k shares per day (3% of the total order). This provision prevents Delivery Hero from selling stock quickly and efficiently if a buyer is willing to pay materially more than the €73 minimum price. This provision has absolutely no economic justification in our view and seems designed to maximize the magnitude and duration of the overhang on the Takeaway.com stock price.
- Timing: Takeaway.com’s stock price traded above Delivery Hero’s €73 per share minimum price for a full five months prior to the start of Delivery Hero’s share sales, reaching as high as €85 during that period(4). It is a convenient coincidence that Delivery Hero finally decided to sell its shares at a deep discount just 11 days before Prosus signed an NDA with Just Eat.
We and other Just Eat shareholders are happy to consider fair proposals from Prosus. However, Just Eat shareholders will suffer if Prosus is not required to compete on a level playing field.
We believe that Takeaway.com’s offer for Just Eat creates a business worth 1,200p per share by the end of 2020, which is based on the 2021 consensus revenue forecasts for each company and a multiple of 7.5x forward revenue(5). We believe that a 7.5x forward revenue multiple is consistent with historical trading and is supported by reasonable estimates of normalized free cash flow margins.
Prosus and other cash bidders for Just Eat need to deliver value that reflects the significant upside potential of the Just Eat merger with Takeaway.com.
Alex Captain, Founder and Managing Partner, Cat Rock Capital Management LP, commented:
“Prosus and its concert parties cannot be allowed to undermine competing bids for Just Eat. The Just Eat Board and relevant authorities must take action to restore the integrity of this sale process.”
“Press reports suggest Prosus believes its 710p per share offer is a ‘full and fair price’ for Just Eat. We think the Prosus bid is neither full nor fair. Amazingly, Prosus has actually offered a discount to the value of the Takeaway.com bid before Prosus’ own portfolio company began selling Takeaway.com shares in the open market.”
“We stand ready to consider fair offers from Prosus and any other interested buyers, but these offers must compete on a level playing field with the significant value delivered by a Takeaway.com merger.”
Cat Rock has provided Just Eat shareholders and other interested parties with additional research regarding Delivery Hero’s share sales at JustEatMustDeliver.com.
Sidley Austin LLP and White & Case LLP are serving as legal advisors to Cat Rock Capital Management LP.
About Cat Rock Capital Management LP
Cat Rock Capital Management LP is a long-term focused investment firm that manages capital on behalf of pension funds, endowments, foundations, and other institutional investors. It seeks to invest in a select number of high-quality companies, with a long-term approach that emphasizes deep fundamental research. Cat Rock Capital is based in Connecticut, USA and was founded in 2015 by Alex Captain, a former Partner at Tiger Global Management.
Notes:
(1) Cat Rock also owns approximately 3.4 million shares of Takeaway.com, representing circa 5.6% of outstanding shares.
(2) Delivery Hero Form 8 (DD) filed 23 October 2019.
(3) Prime Ventures conducted placements of Takeaway.com stock on 7 September 2017, 15 March 2018, 10 May 2018, and 12 September 2018 at discounts ranging from 4% to 7%. Morgan Stanley conducted an additional placement on 5 April 2019 on behalf of Delivery Hero as part of a collar transaction that resulted in a 2% discount.
(4) Takeaway.com price data sourced from Bloomberg. The Takeaway.com stock price first exceeded €73 per share on 3 April 2019.
(5) Consensus estimates for Just Eat and Takeaway.com sourced from S&P Capital IQ as of 24 October 2019.
DISCLAIMER
Cat Rock Capital is publishing this announcement solely for the information of other shareholders in Just Eat plc. This announcement is provided merely for general informational purposes and is not intended to be, nor should it be construed as (1) investment, financial, tax or legal advice, or (2) a recommendation to buy, sell or hold any security or other investment, or to pursue any investment style or strategy. Neither the information nor any opinion contained in this announcement constitutes an inducement or offer to purchase or sell or a solicitation of an offer to purchase or sell any securities or other investments in the Company, Takeaway.com, or any other company by Cat Rock Capital or any fund or other entity managed directly or indirectly by Cat Rock Capital in any jurisdiction. This announcement does not consider the investment objective, financial situation, suitability or the particular need or circumstances of any specific individual who may access or review this announcement and may not be taken as advice on the merits of any investment decision. Any person who is in any doubt about the matters to which this announcement relates should consult an authorised financial adviser or other person authorised under the UK Financial Services and Markets Act 2000. To the best of Cat Rock Capital’s ability and belief, all information contained herein is accurate and reliable, and has been obtained from public sources that Cat Rock Capital believes to be accurate and reliable. However, such information is presented “as is”, without warranty of any kind, whether express or implied. All expressions of opinion are subject to change without notice, and Cat Rock Capital does not undertake to update or supplement any of the information, analysis and opinion contained herein. This announcement, and its content, distribution and use, is subject to the terms specified at www.JustEatMustDeliver.com.
FORWARD LOOKING STATEMENTS
This announcement contains certain forward-looking statements and information that are based on Cat Rock Capital’s beliefs as well as assumptions made by, and information currently available to, Cat Rock Capital. These statements include, but are not limited to, statements about strategies, plans, objectives, expectations, intentions, expenditures and assumptions and other statements that are not historical facts. When used herein, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan” and “project” and similar expressions are intended to identify forward-looking statements. These statements reflect our current views with respect to future events, are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Further, certain forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. Actual results, performance or achievements may vary materially and adversely from those described herein. There is no assurance or guarantee with respect to the prices at which any securities of the Company, Takeaway.com, or any other company will trade, and such securities may not trade at prices that may be implied herein. Any estimates, projections or potential impact of the opportunities identified by Cat Rock Capital herein are based on assumptions that Cat Rock Capital believes to be reasonable as of the date hereof, but there can be no assurance or guarantee that actual results or performance will not differ, and such differences may be material and adverse. No representation or warranty, express or implied, is given by Cat Rock Capital or any of its officers, employees or agents as to the achievement or reasonableness of, and no reliance should be placed on, any projections, estimates, forecasts, targets, prospects or returns contained herein. Any historic financial information, projections, estimates, forecasts, targets, prospects or returns contained herein are not necessarily a reliable indicator of future performance. Nothing in these materials should be relied upon as a promise or representation as to the future.
PERMITTED RECIPIENTS
In relation to the United Kingdom, this announcement is being issued only to, and is directed only at, (i) investment professionals specified in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 as amended (the “Order”), (ii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order and (iii) persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000) in connection with the issue or sale of any securities of the Company or any member of its group may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as “Permitted Recipients”). Persons who are not Permitted Recipients must not act or rely on the information contained in this announcement.
DISTRIBUTION
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Contacts
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Charlotte Balbirnie
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