Feeding frenzy in takeaway food delivery services

The regulator has just given Takeaway.com’s purchase of Just Eat the green light. The food delivery sector is consolidating rapidly. Matthew Partridge reports

Just Eat is about to be eaten. The Competition and Markets Authority (CMA) has approved Takeaway.com’s £6.2bn takeover, says James Cook in The Daily Telegraph. The CMA’s decision comes months after it announced a “surprise” investigation into whether the deal would have reduced competition by discouraging Takeaway.com, which is based in The Netherlands, from re-entering the British market independently. However, the watchdog has now decided that it was “unlikely” Takeaway.com would have resumed operations in the UK after pulling out in 2016 following hefty losses. The deal follows a “bidding war” between Takeaway.com and Prosus, the investment arm of technology group Naspers, for Just Eat.

The merger reflects a wider trend in online food delivery, says Ingrid Lunden on techcrunch.com. While such technology platforms have proved popular, their growth has come at a price. “Heavy competition” between several firms and the economics of on-demand services have meant that all of them need “large sums of cash” to grow and survive while they “slowly inch towards profitability”. So those who don’t manage to raise enough cash “fall by the wayside” or end up “swallowed up in larger consolidation plays for economy of scale”.

Amazon rescues Deliveroo

The Just Eat-Takeaway.com merger isn’t the only food delivery deal to be approved during the current crisis, says Hugo Miller on Bloomberg. Earlier this month, the CMA gave a green light to Amazon’s purchase of a $575m stake in Deliveroo because the British firm required a cash injection from the US tech giant to avoid bankruptcy. Deliveroo had suffered particularly badly because most of the restaurants it delivered for had “been forced to shut” owing to the coronavirus outbreak. The CMA has said that it is trying to speed up decisions in order to “give businesses greater certainty”.

I’m glad to see the CMA ditching its “overly aggressive” stance of opposing digital takeovers, says Jim Armitage in the Evening Standard. Most British consumers “had never even heard of Takeaway.com”, so it was always a stretch for the CMA to argue that its takeover of Just Eat could hamper competition simply because there was an outside chance that the Dutch company “might one day try to relaunch its own UK service”. Such arguments were even weaker in the case of Deliveroo and Amazon, since the latter company hadn’t ever entered the market. 

Yet there is something troubling about CMA’s decision to approve Amazon’s purchase on the grounds that it was necessary to keep Deliveroo afloat, says Cat Rutter Pooley in the Financial Times. Plenty of companies “laid low by Covid-19” will argue that if Deliveroo clears that hurdle, they “should be allowed to tie-up with rivals too”. If the CMA want to keep its “tough guy” image, it must resist such arguments.

Recommended

Investors are shunning UK stocks – but they might regret that in a year’s time
UK stockmarkets

Investors are shunning UK stocks – but they might regret that in a year’s time

There are a number of reasons why investors aren't buying UK stocks, says John Stepek. But they may want to rethink that strategy.
29 Sep 2020
Markets wobble on second-wave fears
UK stockmarkets

Markets wobble on second-wave fears

Speculation about a new lockdown in Britain saw the FTSE 100 slide 3.4% on Monday, its worst one-day loss since June.
24 Sep 2020
More bad news for bank stocks
Bank stocks

More bad news for bank stocks

Stories about suspicious transactions may be overblown, but HSBC has plenty of other problems to worry about. Matthew Partridge reports
24 Sep 2020
Mark Slater: why UK stocks are so unpopular right now
UK stockmarkets

Mark Slater: why UK stocks are so unpopular right now

Merryn talks to Mark Slater of the Slater Growth fund about why investors have abandoned the UK – and why they are wrong to have done so. Plus, he pic…
11 Sep 2020

Most Popular

Investors are shunning UK stocks – but they might regret that in a year’s time
UK stockmarkets

Investors are shunning UK stocks – but they might regret that in a year’s time

There are a number of reasons why investors aren't buying UK stocks, says John Stepek. But they may want to rethink that strategy.
29 Sep 2020
Are we really in a stockmarket bubble?
US stockmarkets

Are we really in a stockmarket bubble?

The rise of “cash shell” companies, sky-high valuations – everything seems to point to a stockmarket bubble. But all may not quite be as it appears, s…
28 Sep 2020
Two commodities that could lie at the heart of the next resources bubble
Energy

Two commodities that could lie at the heart of the next resources bubble

Commodities tend to move in cycles. And if you can identify early on which ones are about to surge in demand, you can profit handsomely. Dominic Frisb…
30 Sep 2020