Amazon.com Inc AMZN.O has secured the right to buy a 2% stake in Just Eat Takeaway.com's TKWY.AS Grubhub and will offer no-fee access to the service for a year to US Prime members, hoping to boost subscriptions with a renewed push into meal delivery.
Announced ahead of Amazon's July "Prime Day" marketing blitz starting Tuesday 12 July, the deal lets the online retailer's loyalty club members use Grubhub without delivery fees on orders over $12 in more than 4,000 U.S. cities.
Shares in Just Eat Takeaway rose more than 15% to €15.86 in Amsterdam trading on Wednesday 6 July. The deal is a major relief for Europe's largest meals company, whose stock had fallen 70% this year.
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Shareholders have demanded it sell or find a partner for Grubhub, which it bought last year for $5.8 billion. Demand has waned since the height of the pandemic, and it has lost market share to Doordash DASH.N and Uber Eats UBER.N.
Amazon will receive warrants representing 2% of Grubhub's shares, and an additional 13% of shares conditional on the deal bringing Grubhub enough customers.
Amazon's stock rose more than 1%, while Uber shares fell approximately 4% and Doordash tumbled approximately 7%. Just Eat Takeaway specified in a statement it continues to "explore the partial or full sale of Grubhub," though there is no certainty any deal will be reached.
In a note on the Amazon deal, analysts from JPMorgan said it would bring new customers and strengthen Grubhub's position in the United States, comparable to a partnership Amazon has in Britain with Just Eat rival Deliveroo ROO.L.
"While Grubhub is now only a smaller part of Just Eat Takeaway's portfolio, representing about 20% of estimated 2023 revenues, this step improves JET's position in potentially selling (Grubhub)," analysts wrote.
Globally, Amazon has said it has more than 200 million Prime members. It raised the annual cost of membership to $139 from $119 in the United States this year and has aimed to show the higher price-tag is worth it.
Analysts said this was an easy, inexpensive way for Amazon to resume US restaurant delivery after exiting that business in 2019 because it lacked sufficient restaurant supply.
“Our thought is 'hey, why not?", analysts at RBC Capital Markets wrote.
The deal represents a familiar playbook for Amazon, which for years acquired warrants to buy stock in air transport and food distribution companies, prodding these partners to support the online retailer’s business without putting up money for a total acquisition.
Just Eat Takeaway said the agreement is expected to expand membership to Grubhub+, while having a neutral impact on Grubhub's earnings in 2022 and providing a boost from 2023 onward.
Gross Assets And Pre-Tax Loss
The company said that Grubhub's gross assets were worth €6.5 billion euros at the end of 2021, and it made a pretax loss of €403 million in that year.
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