Shares of Just Eat Takeaway (AS: TKWY) went up by more than 17% on Wednesday after the online delivery service announced a new partnership with Amazon (NASDAQ: AMZN) that will see the tech giant take a stake in its Grubhub unit.
The deal gives Amazon Prime members in the U.S. a free one-year subscription to Just Eat’s Grubhub+ service. It will be renewed every year. In exchange, Amazon will get warrants for more than 2% of Grubhub’s fully diluted common equity, plus an additional 13% based on how Grubhub does in the future.
Just Eat said that the agreement won’t change how well Grubhub, a company based in Chicago, does financially this year, but it will boost the unit’s earnings and cash flow in 2023.
But Just Eat said it would still work with its advisors to look into a “partial or full sale” of Grubhub. One of the people who is interested in buying the group’s division is said to be Apollo Global Management, a private equity firm.
Just Eat said in a statement that there is no way to know for sure if an agreement will be reached with other parties about Grubhub or when or how it will work.
Just Eat also said that Grubhub’s total assets at the end of 2021 were worth €6.5 billion, while its annual loss before taxes was €403 million.
The deal with Amazon on Wednesday comes as Just Eat faces pressure from its shareholders to sell Grubhub, the delivery company it bought for $5.8 billion in shares last year. Investors are worried about how profitable the whole group will be in the future because Just Eat has warned of a slowdown in annual customer spending and fierce competition from companies like Deliveroo (OTC: DROOF) and Uber (NYSE: UBER). In April, Just Eat said it would be a year before it made any money.
Meanwhile, aggressive interest rate hikes by the central bank to stop a recent rise in inflation have hurt the idea that Just Eat’s value is based on cheap capital costs. Over the past year, the company’s shares have dropped by more than 80%.
