Hedge fund Eminence Capital said Sept. 3 it intends to vote against Just Eat PLC's €11.1 billion merger with Takeaway.com NV, calling the financial terms of the deal "grossly inadequate."
In a statement, Eminence said that while it supports the rationale for the merger, the structure undervalues Just Eat's "strong portfolio of assets." The hedge fund owns about 4.4% of Just Eat, making it the company's seventh-largest shareholder.
Eminence noted that under the current terms of the deal, Just Eat would own about 52% of the equity of the combined entity, despite contributing about 70% of estimated 2020 revenue and gross profit. It also does not account for Just Eat's 33% stake in Brazil-based iFood, which Eminence described as the country's "dominant food/delivery marketplace" and a "highly coveted asset."
"It is clear to us that TKWY's offer of a 15% premium to JE’s closing price on July 26 is highly opportunistic. We believe that a valuation disparity of this degree is unprecedented in similar transactions over the past decade and represents a gross undervaluation of JE’s strong portfolio of marketplace assets," said Ricky Sandler, CEO and chief investment officer of Eminence, in the statement.
The two food delivery operators agreed Aug. 5 to a merger that values Just Eat shares at 731 pence each. The shares are now trading at 763.6 pence, suggesting that investors could be anticipating a higher offer price.
Aberdeen Standard Investments, Just Eat's fifth-largest investor with a 5.11% stake, has also criticized the deal. Investment Director Frederik Nassauer said the offer "does not fully reflect the intrinsic value of the group" and exposes Aberdeen Standard to higher execution/integration risks in the medium term, the Financial Times reported.
"As the share price continues to trade above the offer price, we (as well as the market) currently expect the offer will be raised in the coming weeks," Nassauer reportedly added.
