SA’s Prosus aims to put the bite on Uber Eats

In its first major move that underlines its ambition to take on Silicon Valley giant Uber Eats, Naspers’s newly listed internet arm Prosus waded into a bidding war for UK-based online food delivery group Just Eat on Tuesday.

The R93bn offer directly to shareholders comes a month after Prosus was spun out of Naspers and listed separately on the Amsterdam’s Euronext. This is part of CEO Bob van Dijk’s strategy of building Prosus around three pillars: online payments; food delivery; and online classifieds.

Under the deal, Prosus offered 710p per share in cash for Just Eat, a 20% premium to a rival all-share offer from Amsterdam-based Takeaway.com, based on Monday’s closing prices.

Prosus said it had spoken to the board of Just Eat – which operates in 13 countries including Australia, Spain and Canada – about a friendly offer but failed to reach an agreement. “Consequently, Prosus is making this announcement to give Just Eat shareholders the opportunity to con

sider the offer,” Prosus said in a statement. It said that it was in a better financial position than Takeway.com to ensure Just Eat could defend its market share.

The deal, if successful, will roughly double the value of Prosus’s food-delivery portfolio to R176bn and hand it a company with forecast annual revenues of up to £1.1bn in 2019 and underlying core earnings, excluding operations in Brazil and Mexico, of as much as £205m.

Prosus, which would fund the deal through debt, has promised to invest a substantial amount to help grow Just Eat, which competes with Silicon Valley giant Uber Eats and Amazon-backed Deliveroo.

Prosus had about $6bn of cash at the end of June.

In a statement posted on its website, Just Eat said Prosus’s offer “significantly undervalues” its assets and prospects, and that a tie-up with Takeaway.com offered a “compelling strategic rationale”.

The transaction would also throw Prosus, which is 73% owned by Naspers, into a historically tricky UK market for SA companies. Several companies, ranging from fast-food chain Famous Brands and clothing retailer Truworths to investment house Brait, have struggled to deliver returns from their ventures in the UK.

BREXIT UNCERTAINTY

Bright Khumalo, a portfolio manager and analyst at Vestact Asset Management, said that this was probably a good time for global investors such as Prosus to buy assets in the UK, as markets had been depressed by the uncertainty brought about by Brexit.

“The most important thing is for Prosus to have a strategy around how to grow the business and make a return on the investment,” Khumalo said.

However, he emphasised that the danger for Prosus will be a protracted bidding war as it becomes less likely that it will get the price it wants and risk getting into a battle of egos with the competition.

Just Eat’s share price was up 24.87% in London at £735.96 on Tuesday, well above the Prosus offer price and suggesting that investors are holding out for a higher offer or Takeway.com to outbid Prosus.

Prosus, which owns a third of China’s Tencent and several other businesses, was listed separately on September 11, instantly pushing it to the top three biggest companies on the Euronext exchange and giving Europe its biggest internet company.

Prosus has spent about $2.8bn (R41bn) since 2016 investing in the food-delivery sector, with investments including Swiggy in India and iFood in Latin America.

Its share price ended down 1% at R1,065 on Tuesday.