Just Eat Takeaway (JET) has been urged to sell or spin-off its US arm Grubhub by an activist investor by the end of the year.
Investor Cat Rock Capital has said the food delivery firm’s management “failed to fix the deep and damaging undervaluation of its equity by taking tangible action to unlock the value of its portfolio” at a recent capital markets day.
“Assuming equity performance consistent with the MSCI World Index, JET’s current valuation embeds negative €14bn of value for acquiring Grubhub, vastly exceeding the €6.5bn purchase price for the asset,” Alex Captain, Cat Rock’s founder said.
A Grubhub sale or spin-off “at any positive valuation could drive over 100% appreciation in JET’s stock as it returned to its historical rating,” Captain added.
JET said in a response on Monday “while Grubhub has some specific challenges today, it is a large and growing business with good underlying profitability.
“The Company has a clear improvement plan to refocus Grubhub on key strongholds, expand new verticals and is excited by Grubhub’s potential,” it added.
The group said it “believes that, over time, it will be a participant in the consolidation of the wider US market as various players combine to optimise last mile delivery.”
Cat Rock is one of the group’s biggest shareholders, with a 6.5 per cent stake.
Cat Rock’s Captain said there was “no question” that a combined online food delivery and grocery app “offers a far better consumer proposition than either service alone.”
He added: “For example, a partial or complete Grubhub sale to Amazon Whole Foods at any valuation would significantly improve the consumer proposition for both companies and dramatically increase competition in the US online food delivery market by providing Grubhub with the resources to credibly compete against the massive, converged US businesses of DoorDash and UberEats.”