Why the potential Uber-Deliveroo deal could be a ‘terrifying’ development for Just Eat
Shares in online takeaway platform Just Eat (JE.) are languishing at a one-year low at 662.8p on reports that Uber is in talks to buy rival Deliveroo for several billion dollars.
Broker Canaccord Genuity analyst Nigel Parson says the development is ‘potentially terrifying’ for Just Eat, warning a possible war for market share could be ‘very damaging’ for margins and profits.
Just Eat has been struggling to catch up with its rivals and revealed plans to set up a delivery network with a £50m investment earlier this year, which was not well received by investors.
Amid intense competition and in reaction to high commission fees, some of the company’s customers have abandoned the platform in favour of developing their own or using alternative providers.
Berenberg is sceptical over a potential merger between Uber Eats and Deliveroo, flagging the latter has historically been reluctant to relinquish its independence.
The broker argues the deal could create a scaled and capitalised competitor instead of an overwhelming new rival.
Just Eat needs to arrest the decline in its shares if it hopes to remain in the FTSE 100 past the New Year.
If it falls from its current position as the 100th largest London-listed firm to below 110, the company will be automatically ejected at the next quarterly reshuffle in December. (LMJ)