- The British Competition and Markets Authority is investigating a proposed merger between Just Eat and Dutch-based Takeaway.com to determine whether it might stifle competition in the U.K. market, reports Seattle Times.
- The $8 billion deal was scheduled to close within a few days when the regulatory authority announced its last minute inquiry.
- The halt comes after a months-long review of Amazon's attempt to acquire a $575 million minority stake in Deliveroo in May 2019, Just Eat's biggest U.K. rival.
The CMA investigation is already causing hardships for the companies, with Just Eat's shares falling 3% last week after news of the probe was announced even though over 90% of its shareholders had approved the deal. Takeaway.com is one of Europe's largest delivery players, processing 71 million orders across 11 countries in 2019. It reported gross revenue increases of 68%, as well.
Some have cast doubt about Just Eat's ability to compete with major players like Deliveroo and Uber Eats. After Amazon invested in Deliveroo last year and Just Eat posted a 98% drop in profits from the same period in 2018, things seemed grim. The proposed merger with Takeaway could be the company's attempt to find a life raft amid swelling competition. The U.K. delivery sector is worth nearly over $10 billion in 2018, so there's business to go around.
Proving that Takeaway would have entered the U.K. market may be an uphill battle, however. Takeaway has already tried to establish a U.K. market, but pulled out in 2016 after losing more than $100,000 due to competition from players like Uber Eats and Deliveroo, according to City A.M. Whether it would have made another attempt to enter the market and whether the second go would be more profitable is unclear.
One of the biggest operators in the U.K. delivery market, Deliveroo, has also been struggling to reach a profitable operating point despite several years of rapid growth. With a reported pre-tax loss of $241 million in 2018 and a 72% rise in sales, Deliveroo has also doubled the number of markets where it operates. To add to its operational uncertainty, the company has also undergone a wave of executive leadership changes.
Despite the financial hardships, it launched a number of new initiatives to buoy its business, including a restaurant rescue team that converts struggling operations to delivery-only outfits, a virtual brands incubator program and a restaurant makeover competition. Delivery companies are coming up with many different approaches to try to lure restaurant operators and build loyalty among consumers, which adds more pressure to their bottom lines.