Shares in Just Eat took a tumble this morning after news broke that Competition and Markets Authority (CMA) is to investigate its proposed merger with rival firm Takeaway.com.
Stock fell by three per cent as trading started before rallying an hour or so later. The merged company has said it will postpone its share launch for a week, but intends to begin trading on February 3rd.
However, an enforcement order from the CMA which will stop the merger getting the green light whilst the investigation is underway could prevent this.
The CMA could ultimately decide to launch a formal investigation into whether the deal would reduce competition in the market, which would mean that the integration of the two businesses would be curtailed until its examination was completed.
The interest from the CMA has been sparked by analysis of whether Takeaway, the Netherlands-based company which quit the UK in 2016 after haemorrhaging £768,000 (€912,000, $1m) in the face of fierce competition from Uber Eats, Deliveroo and others, would have re-entered the UK market without the current deal.
In spite of the share price drop some city analysts remain confident that the deal will go through uninterrupted,
Neil Wilson, chief markets analyst at markets.com, told CityAM: “shares may reflect some tail risk in this deal running into trouble, ultimately though it is hard to see why the CMA, however fickle it has been in the past, would not let this deal go through. It strikes me as a little bit last-minute.com and not likely to stop the merger.”
Just Eat, the UK’s leading food delivery service, had been seeking a partner to bolster its market position. Following discussions with a number of parties including Prosus it agreed a deal with Takeaway valued in the region of £6.2bn.
After leaving the UK Takeaway enjoyed a profitable run with its most recent half-year results reporting that gross revenue has climbed 68 per cent to €185m.
The UK home delivery market is a potentially lucrative one that has attracted the interest of other significant players like Amazon. According to the MCA Foodservice Delivery Report 2019, the food delivery market is now worth £8.4 billion, up from £8.1 billion in 2010, which is up 18 per cent year-on-year. The average spend on takeaways is £9.49 per head, up six per cent from last year.