Cat Rock calls on Just Eat to explore combinations, sell non-core assets

Just Eat Takeaway.com should explore combinations with other global players and consider selling non-core assets if it wants to defend itself against a potential hostile takeover, according to one of the company’s largest shareholders.

In a statement on Tuesday, Cat Rock Capital said it had been "deeply disappointed by the company’s poor handling of its relationship with investors". It argued that Just Eat’s "flawed communication" has made it the worst-performing online food delivery stock over the past two years despite a strong operational performance.

Cat Rock noted the share price has fallen 11% over the past two years even as the gross merchandise value has grown more than 100%. As a result, the company’s valuation has declined by 75% to around 11x revenue in mid-2019 to just 2.6x revenue currently.

Cat Rock outlined several ways it reckons Just Eat could fix its problems. It said the company needs to provide investors with transparency on the expected magnitude, composition, and returns of its investments. Specifically, it should provide disclosure on the current and future unit economics of its logistics and grocery businesses.

In addition, the firm needs to "aggressively address and exploit the deep undervaluation of its equity" by selling non-core assets, using the proceeds to invest in its growth and repurchase the shares issued in the Grubhub transaction.

Just Eat should also explore strategic combinations with other global players, it said.

Cat Rock founder and managing partner Alex Captain said: "Just Eat Takeaway.com is a fantastic business with #1 positions in many of the world’s most valuable online food delivery markets and a long runway for growth.

"However, JET has failed to upgrade its communications with investors and the markets since IPO, leaving it deeply undervalued and vulnerable to takeover bids at far below intrinsic value.

"JET can quickly and materially improve its standing in the capital markets by improving transparency, selling non-core assets, and exploring strategic options to strengthen the business and generate significant shareholder value.

"We remain incredibly excited about JET’s prospects and look forward to continued engagement with management and shareholders to help the company achieve its great potential."