Wonder Group, Inc. (private) has agreed to acquire Grubhub Inc. from Just Eat Takeaway.com N.V. (ENXTAM: TKWY) (JET) for $650 million, $150 million in cash, and $500 million in senior notes.
Wonder, which operates delivery-focused food halls, expects the transaction to be completed in Q1/2025, subject to regulatory approvals and deal conditions.
European food delivery giant JET bought Grubhub in 2020 for $7.3 billion, possibly outbidding Uber (NYSE: UBER), and it was at the start of the COVID-19 pandemic when food delivery spiked.
Wonder’s Growth and Strategic Goals
Wonder, which has 28 locations in the Northeast, has a platform that lets customers order from 30 restaurants with delivery in under 30 minutes.
In March, Wonder raised $700 million, to expand to 90 locations by 2025, and added Tony Hoggert as its chief operating officer. Mr. Hogger was an executive at Amazon’s grocery store division. As part of this acquisition, Wonder announced a $250 million capital raise to support its growth and mission.
Last year, Wonder acquired Blue Apron for $112.4 million. Blue Apron operates a direct-to-consumer, meal-kit company that delivers recipes and fresh ingredients.
Grubhub’s Market Position and Challenges
Grubhub currently works with 200,000 delivery partners and 375,000 merchants in 4,000 cities in the U.S. It also offers campus dining services to over 360 universities and corporate accounts to over 10,000 companies.
However, according to market data, Grubhub’s relative share of the growing U.S. food delivery market has decreased since 2020 and it continues to struggle with profitability as free cash flow was negative.
To expand its reach, earlier this year, Grubhub made a deal to get added to the Amazon Prime membership benefits and it also partnered with grocers, including Albertson, to add groceries into its offering mix.
Howard Migdal and Marc Lore, the CEOs of Grubhub and Wonder, respectively, also made positive remarks, stating that the acquisition would support Wonder‘s objective to “make great food more accessible” and improve customer experiences.
Just Eat Takeaway’s Strategic Decisions
JET has been attempting to sell Grubhub since April 2022 after activist investor Cat Rock Capital believed it was hindering JET’s focus in the other 18 countries it operates in.
JET reported that it will use the funds to improve its balance sheet and focus on countries where it has a competitive edge.
Competitive Landscape
As more well-known platforms entered the market, such as DoorDash (NASDAQ: DASH) and Uber Eats, competition quickly grew.
According to research from data analytics company Bloomberg Second Measure, as of March 2024, Grubhub accounted for just 8% of U.S. meal delivery consumer spending, which is far less than that of DoorDash (67%) or Uber Eats (23%).
FIGURE 1: Meal Delivery – Observed Monthly Sales (March 2024)
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