Yelp Inc. is selling its Eat24 business to online and mobile food ordering company GrubHub Inc. in a cash deal worth $287.5 million.
Immediately before the closing, Yelp will also transfer certain assets to Eat24 that are material to or necessary for the operation of Eat24 business and which are not then owned by Eat24. Yelp will receive the purchase price upon the closing of the deal, subject to customary post-closing adjustments based on net working capital, indebtedness and selling expenses. From that amount, $28.75 million will be held in escrow for an 18-month period after completion to secure GrubHub's indemnification rights under the agreement.
Both companies have the right to terminate the deal under certain circumstances, including if the deal has not closed by Nov. 1. The termination date will be automatically extended to April 30, 2018, if all conditions to closing, other than those related to antitrust and regulatory approval, have been satisfied or waived as of Nov. 1.
Yelp will be entitled to receive a termination fee of $15.0 million from GrubHub if either company terminates the deal due to the failure of deal completion by the termination date, as it may be extended, due to the failure to satisfy the antitrust condition, provided all other conditions to closing have been satisfied or waived, or if the deal is not completed by such termination date due to any antitrust-related final, non-appealable order or injunction that bars the closing.
The deal is subject to customary closing conditions, including the expiration of U.S. antitrust waiting periods. Kirkland & Ells LLP is serving as legal adviser to GrubHub, while Orrick Herrington & Sutcliffe LLP is serving as legal adviser to Yelp.
Following the completion of the deal, the two companies will enter a long-term partnership, pursuant to which Yelp will integrate online ordering from all GrubHub restaurants onto its local goods and services platform. This will enable users to discover and order from about 75,000 local restaurants through either GrubHub's or Yelp's interface.
In other news, Yelp's board allowed the company to repurchase up to $200 million of its common stock. Yelp will fund the program by cash available on its balance sheet. As of June 30, Yelp had 81.8 million common shares outstanding.