Activist Cat Rock urges Just Eat Takeaway to offload Grubhub

Cat Rock Capital wants the FTSE 100 business to sell or spin off its US business but Just Eat believes it is the ‘right strategy’ to retain it.

Henry Saker-Clark
Monday 25 October 2021 13:21
Investor Cat Rock has called on Just Eat Takeaway to offload its Grubhub arm in the US (Peter Byrne/PA)
Investor Cat Rock has called on Just Eat Takeaway to offload its Grubhub arm in the US (Peter Byrne/PA)

An activist investor in Just Eat Takeaway has called on the fast food delivery operator to offload its US business Grubhub.

In a letter to Just Eat bosses, Cat Rock Capital has urged the FTSE 100 business to sell or spin off Grubhub by the end of the year.

In response, Just Eat told the stock market that it believed it was the “right strategy” to retain Grubhub as part of the business.

The move comes just four months after Just Eat completed its purchase of Grubhub in a deal worth around £5.8 billion.

A deeply depressed stock price poses a real risk to Just Eat Takeaway’s business

Alex Captain, Cat Rock

Cat Rock, which owns around 6.5% of Just Eat, asked the firm’s management to refocus the business and “address the deep and damaging undervaluation of the company’s equity” in the letter.

Three months ago, Cat Rock appealed for Just Eat to look at strategic options including sales or merger with a rival.

It warned that if nothing was done the company would be undervalued and vulnerable to a cheap takeover offer.

On Monday, Alex Captain, founder and managing partner of Cat Rock, said: “Just Eat Takeaway management failed to fix the deep and damaging undervaluation of its equity by taking tangible action to unlock the value of its portfolio.

“In fact, the capital markets day only highlighted the magnitude of the problem.

“A deeply depressed stock price poses a real risk to Just Eat Takeaway’s business, limiting its financial and strategic flexibility, inviting competitors to invest in its markets, and leaving the company vulnerable to takeover bids well below its long-term intrinsic value.

“Just Eat Takeaway must take substantive and immediate action to solve this valuation problem.”

In a statement, Just Eat said: “The company has explained that, while Grubhub has some specific challenges today, it is a large and growing business with good underlying profitability.

“The company has a clear improvement plan to refocus Grubhub on key strongholds and expand new verticals, and is excited by Grubhub’s potential.

“Just Eat Takeaway agrees with Cat Rock that Grubhub has significant strategic value, which is why the company believes that, over time, it will be a participant in the consolidation of the wider US market as various players combine to optimise last-mile delivery.

“The management team expects to be involved in this consolidation when it comes and intends to do so from a position of strength that reflects the strategic value of Grubhub.”

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