Just Eat to pay £200m upfront with another £40m contingent on performance.
Companies: Just Eat
Just Eat (LSE: JE) solidified its position as the leading online food delivery platform in the UK this morning by announcing it has agreed to acquire Hungryhouse from Delivery Hero. Hungryhouse has the second biggest market share in the UK after Just Eat and as such Management confirms the acquisition "will be subject to approval by the Competition and Markets Authority".
The consideration is £200m upfront with a £40m kicker that is contingent on performance between signing and completion.
Hungyhouse generated £16.3m in revenue and a £4m loss back in 2014 according to a Telegraph article earlier this year. Just Eat confirms Hungryhouse achieved a loss of £13m in 2015. However, Just Eat expects the acquisition to be earnings accretive in year 1 with a 2017 pro forma EBITDA of £12-15m (excluding £1m of exceptionals). This implies Just Eat have paid 15-18x EBITDA for the business.
David Buttress, Just Eat CEO commented:
"The UK has long been an engine of growth for Just Eat. While we have significantly expanded internationally in recent years, we have remained focused on building a high growth, sustainably profitable business domestically. Through this transaction, we would extend our market presence in the UK and sustain high levels of growth given the considerable opportunity in this market."
Consensus Revenue/EPS forecasts for Just Eat, according to the FT, are £370m/11.3p in 2016 and £474m/17p. In terms of valuation that puts the shares on 54x 2016 and 36x 2017 earnings.
Shares have responded well this morning and are up 2.6% in early trading.