Just Eat agreed the acquisition of four businesses from Rocket Internet and foodpanda for €125 million in aggregate, to be funded from existing cash resources.
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The businesses acquired are online takeaway food businesses trading in Spain (La Nevera Roja), Italy (PizzaBo/hellofood Italy), Brazil (hellofood Brazil) and Mexico (hellofood Mexico).
The acquired businesses are highly complementary to Just Eat’s existing businesses in these important territories and the Acquisition is in line with Just Eat’s strategic ambition to be a market-leader in the geographies in which it operates, bringing scale, focus and new talent to our local operations.
The takeaway delivery market in these four territories is worth over £8 billion.
Volume and scale generate significant benefits to the markets concerned, offering an enlarged customer base for takeaway restaurants and greater choice for consumers.
There are also compelling economic benefits of scale that lead, in time, to material synergies and meaningfully higher sustainable margins. The success of the 2014 consolidation in Brazil demonstrates the highly effective nature of in-market M&A in this industry.
Just Eat’s joint venture with Movile, iFood, is the Brazilian market leader and processed 1.1 million orders in December 2015, up 150% year-on-year.
In aggregate, the acquired businesses grew orders by 83% in 2015, and JUST EAT expects the Acquisition, net of one-off exceptional transaction and integration costs, to be accretive to adjusted EPS for the 2016 financial year and to add £5 million to 2017 EBITDA.
Further material synergies and margin improvements are expected as the combined businesses achieve more rapid and profitable growth, with improvements to EBITDA of £10 million per annum expected in 2018.
The acquisition of the businesses in Italy, Brazil and Mexico is completed. The acquisition of the Spanish business is subject to regulatory approval from the local competition authority, the Comisión Nacional de los Mercados y la Competencia, and it is anticipated that it should complete by the end of Q2 2016.
On completion, operational control of hellofood Brazil will pass to iFood, and the business is expected to be sold on to the joint venture in due course.
The value of the gross assets of the businesses acquired as at 31 December 2014 was €6.4 million and the aggregate losses before tax for the year ending the same date were €16.3 million. ■