25th Oct 2021 10:47
(Alliance News) - A significant shareholder in Just Eat Takeaway.com NV on Monday told the food delivery firm to sell or spin-off its Grubhub business in the US by the end of the year to help address the Anglo-Dutch group's "deep and damaging undervaluation".
Investment firm Cat Rock Capital Management, which holds a 6.5% stake in Just Eat, sent a letter to the company's management board regarding the divestment of Grubhub, highlighting the need to refocus Just Eat's business and address the undervaluation of the company's equity.
In an extract from the letter sent to the board, Cat Rock argued that Just Eat's stock outperformance evaporated when it announced the Grubhub acquisition in June 2020, with the stock "falling over 18% in the four trading days after the announcement".
Just Eat responded on Monday by saying that, while Grubhub had some "specific challenges", it was a large and growing business with good underlying profitability. The company has a "clear improvement plan to refocus Grubhub", and it is excited by its potential, Just Eat added. Management has set out the right strategy for both Grubhub and the company as a whole, Just Eat asserted.
Cat Rock's letter went on to say: "Unbelievably, Just Eat stock has underperformed the MSCI World Index by 69% in the sixteen months since announcing the Grubhub acquisition. Assuming equity performance consistent with the MSCI World Index, Just Eat's current valuation embeds negative EUR14 billion of enterprise value for acquiring Grubhub, vastly exceeding the EUR6.5 billion purchase price for the asset."
The "deep and damaging undervaluation" of Just Eat's equity had failed to be fixed by the group, Cat Rock added, saying it needed to take action to unlock the value of its portfolio.
"The case for a Grubhub sale or spin-off is obvious and urgent. If Just Eat management fails to act on either option before the end of the year, we and other investors will justifiably question whether this team has the capacity for effective capital allocation or management of a public company," the letter went on to say in a damning conclusion.
News of the shareholder's unhappiness comes after Just Eat's announcement last week that its annual outlook was unchanged, though it outlined plans to boost margins as the group looks to trim its losses after 2021.
Just Eat shares were 0.3% higher at 5,756.00 pence each in London on Monday morning. The stock is down 30% so far in 2021.
By Will Paige; willpaige@alliancenews.com
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