Take-out and delivery startups in Europe are experiencing frenzied activity with the recent wave of regional consolidation that comes with putting up resistance against newer entrants like Deliveroo and Uber Eats. Today, Berlin-based Delivery Hero announced that it is selling its UK business, which operates as hungryhouse, to rival Just Eat for £200 million ($251 million) in cash, plus another £40 million ($50 million) added to that based on hungryhouse’s performance between now and the date of the deal closing (subject to approval by the competition regulator).
Another major announcement was Just Eat’s acquisition of SkipTheDishes, a delivery startup in Canada, for £66.1 million ($83 million), to expand its position there.
The two deals follow a mere five days after Delivery Hero — which was last valued at just over $3 billion — announced that it would acquire Foodpanda, another global rival, from Rocket Internet for an undisclosed amount of money. From the current scenario, it seems that the deal in part is to help finance the other transaction. The Foodpanda acquisition strengthens Delivery Hero’s operations in Europe, South America, and Asia.
The UK market has been seen to be a particularly crowded one for food delivery and take out startups. In addition to Just Eat and Delivery Hero, there are newer players like Uber Eats and Deliveroo. The latter two focus on a smaller and higher end selection of restaurants and have as such been eating into the margins and market share of older startups, who have taken more of a blanket approach to the business of takeaway.
Incidentally, this has also been the strategic approach for many of these earlier businesses also when it came to expansion: scale as fast and as globally as you can to improve margins by dominating in all markets (an approach followed by many other on. In the case of the UK, Delivery Hero first entered the country when it acquired hungryhouse in 2011, with the business having its first beginnings in 2006.
As it stands, however, the bigger strategy appears to have changed somewhat, as players like Just Eat and Delivery Hero look to sell off assets in certain regions to help build up their presence in others. This week is not the first time that these companies have been witnessed trading off and selling companies to each other. Previous deals have included Rocket Internet both buying operations from and selling operations to Just Eat.
Niklaus Ostberg, CEO of Delivery Hero said,
The sale of hungryhouse to Just Eat rationalizes our global footprint, and we remain focused on operating market-leading brands, globally. Proceeds from this sale will allow us to pursue further global growth opportunities, as we have consistently and successfully done in recent years. We also want to thank the entire hungryhouse team – this transaction reflects their amazing achievements within the Delivery Hero Group since 2011.
According to Just Eat, it expects hungryhouse to generate EBITDA of between £12-15 million in 2017, excluding one-off exceptional transaction and integration costs of around £1 million.
Of course, this doesn’t mean that these companies are winding down that much or getting any less global in the wider sense — not for now, at least. Just Eat in Canada is a fitting example. The company already claimed to be the number-one take-out company in the market, and it sees the acquisition as a way to strengthen that position. David Buttress, CEO of Just Eat, said in a statement,
The acquisition of SkipTheDishes will materially strengthen Just Eat’s number one position in Canada. Canada is a phenomenally exciting country for online food delivery, with significant runway for growth and a clear opportunity to drive channel shift. SkipTheDishes’ outstanding team, technological know-how and operational excellence has enabled it to develop a business model well-suited to Canada’s unique market conditions. It will complement our existing operations so that Just Eat is best-placed to address this fast-growing market.
SkipTheDishes projects revenues of 23.5 million Canadian dollars for the current year ending December 2016, with a network of 2,900 restaurants and 350,000 active customers.
Delivery Hero, on the other hand, claims that its wider footprint covers 17 million active users and 271,000 restaurants in 27 countries in Europe, the Middle East, Latin America and the Asia-Pacific region. In addition to take out ordering, Delivery Hero also offers premium food ordering and delivery in 51 cities across 10 countries.
Just Eat, which went public in 2014, is based out of London, and lays claim to a coverage of 16.6 million users and more than 63,900 take-out restaurants.
