British online takeaway food service Just Eat (LON:JE) has announced plans to acquire Menulog, its Australian and New Zealand rival, for A$855 million (£445 million).
The deal would be financed from the proceeds of an equity issue to be launched in mid to late May. Completion of the fundraising is expected early to mid June, following the approval of Australian regulators.
Just Eat justified the price tag, which represents 371 times Menulog’s annual earnings, by pointing to the Australian company’s high growth and its potential for fattening up its profit margins. The Australian company is growing rapidly, with 96 percent year-on-year order growth for the three months to March.
The FTSE 250-quoted group said in a statement this morning: “The Just Eat Directors believe there is a compelling rationale for the acquisition of Menulog which will allow it to acquire a market leader in a market of significant scale.”
The International Business Times quoted Jonathan Buxton from Cavendish Corporate Finance as commenting on the planned deal: "How hungry Just Eat is to expand internationally is perfectly illustrated by its decision to snap up Australian takeaway market leader Menulog for such a mouth-watering price.” Nick Batram, an analyst at Peel Hunt, also said in a note that he was “cautious on the price paid” by Just Eat, in a sector where “valuations are being driven ever higher -- which is fine until the music stops.”
Just Eat’s share price slid as much as 10 percent today -- its biggest intraday drop since December 3. As of 12:56 BST, the company’s stock was trading 3.93 percent lower at 476.60p.