Consolidation in the world of on-demand food ordering and delivery continues apace, a move that is creating the world's largest online food-delivery company outside of China in terms of revenue. Europe's Just Eat Takeaway.com has agreed to buy Grubhub in an all-stock transaction worth about USD 7.3 billion. The deal values Grubhub's shares at USD 75.15 apiece, a 27% premium to their Wednesday close.

This is an all-share deal, where Grubhub shareholders will get 0.6710 Just Eat Takeaway.com ordinary shares in exchange for each Grubhub share, representing an implied value of $75.15 for each Grubhub share (based on the undisturbed closing price of Just Eat Takeaway.com on June 9, 2020 of €98.602), the companies said. This gives Grubhub a total equity consideration (on a fully diluted basis) of USD 7.3 billion.

Just Eat Takeaway said the combined operation, which processed 593 million orders in 2019, will have over 70 million combined active customers globally. The massive tie-up comes less than two months after Just Eat and Takeaway.com won UK regulatory approval for a merger of the two companies reportedly worth GBP 6.2 billion (about USD 7.9 billion at today's conversion rate). The acquisition is not just a big piece of M&A in the food delivery space. It also represents a major competitive swipe, as Uber Eats had also been trying to acquire the U.S. company.

Grubhub announced the tie-up with Just Eat shortly after Uber confirmed publicly that it was walking away from the deal. Uber did not comment on specifics of the merger, however reports had surfaced last month that Uber was in pursuit of Grubhub, leading to antitrust concerns because of the two companies' relative dominance of the US market. However, an official statement indicates that Uber still sees consolidation of the food delivery industry as a path to profitability. “Like ridesharing, the food delivery industry will need consolidation in order to reach its full potential for consumers and restaurants,” an Uber spokesperson said in an emailed statement. “That doesn’t mean we are interested in doing any deal, at any price, with any player.”

Investor reception to the deal was mixed. Grubhub shares rose as much as 9% in after-hours trading before settling to about 6.2% above closing price. Just Eat stock fell 10.79%. Meanwhile, Uber shares, which dropped 4.81% to close at USD 34.83, fell another 1.38% in after-hours trading.

Online food delivery has been a tough gig: on one hand, very popular with consumers, but on the other, an extremely commoditised and competitive business, where companies need to spend huge amounts of money to gain and keep customers. One solution to that cycle has been to take out rivals and get better economies of scale on operations. This has been the route so far with Just Eat Takeaway and Grubhub, which combined say they will be profitable and can now focus on improving margins further.

But for the others in the space, the big question now will have to be: Which players will consolidate next? In the U.S., in addition to Uber Eats, there is also Postmates and DoorDash, while the European market has Deliveroo, in addition to a plethora of smaller players in both markets.

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JUST EAT TAKEAWAY.COM ACQUIRED GRUBHUB