Amazon.com has secured the right to buy a 2 percent stake in Just Eat Takeaway.com’s Grubhub and will offer no-fee access to the service for a year to US Prime members, hoping to boost subscriptions with a renewed push into meal delivery. .
Announced ahead of Amazon’s July “Prime Day” marketing blitz starting Tuesday, the deal lets the online retailer’s loyalty club members use Grubhub without delivery fees on orders over US$12 in more than 4,000 US cities.
Shares in Just Eat Takeaway were up 16 percent at €15.98 at 0309 GMT in Amsterdam trading. The deal is a major relief for Europe’s largest meals company, whose stock had fallen 70 percent this year.
Shareholders have demanded it sell or find a partner for Grubhub, which it bought last year for US$5.8 billion. Demand has waned since the height of the pandemic, and it has lost market share to Doordash and Uber Eats.
Amazon will receive warrants representing 2 percent of Grubhub’s shares, and an additional 13 percent of shares conditional on the deal bringing Grubhub enough customers.
Uber shares fell about 4 percent on Wednesday, while Doordash stock tumbled about 8 percent. Just Eat Takeaway specified in a statement that it continues to “explore the partial or full sale of Grubhub,” although there is no certainty that any deal will be reached.
In a note on the Amazon deal, analysts from JPMorgan said it would bring new customers and strengthen Grubhub’s position in the United States, comparable to a partnership Amazon has in Britain with Just Eat rival Deliveroo.
“While Grubhub is now only a smaller part of Just Eat Takeaway’s portfolio, representing about 20 percent of estimated 2023 revenues, this step improves JET’s position in potentially selling (Grubhub),” analysts wrote.
Globally, Amazon has said it has more than 200 million Prime members. It raised the annual cost of membership to US$139 from US$119 in the United States this year and has aimed to show that the higher price-tag is worth it.
Analysts said this was an easy, inexpensive way for Amazon to resume US restaurant delivery after exiting that business in 2019 because it lacked sufficient restaurant supply.
“Our thought is ‘hey, why not?”, analysts at RBC Capital Markets wrote.
The deal represents a familiar playbook for Amazon, which for years acquired warrants to buy stock in air transport and food distribution companies, prodding these partners to support the online retailer’s business without putting up money for a total acquisition.
Just Eat Takeaway said the agreement is expected to expand membership to Grubhub+, while having a neutral impact on Grubhub’s earnings in 2022 and providing a boost from 2023 onwards.
The company said that Grubhub’s gross assets were worth €6.5 billion (US$6.67 billion) at the end of 2021, and it made a pretax loss of 403 million euros in that year.