Just Eat on course to swallow Menulog for £445m

Just Eat has gobbled up its counterpart in Australia and New Zealand for £445m as the hunger for deals in the online takeaway sector continues unabated.

The proposed acquisition of Menulog, Just Eat's biggest deal to date, was a "huge profitability opportunity" and would be accretive to earnings per share from 2016 onwards, said David Buttress, chief executive of Just Eat.

Menulog, founded in 2006, is the market leader in Australia and New Zealand, with revenues of £13.5m and earnings before interest, tax, depreciation and amortisation of £1.2m in the 12 months to March 31.

The £445m price tag, which values Menulog at 371 times ebitda, reflected the potential for growth in Australia and New Zealand, said Mr Buttress.

"This a great asset in a market of scale and the clear leader in a market of scale, and clearly for an asset like that you have to pay a fair price," he said, noting that Menulog had reported a near doubling of the number of orders year-on-year in the first three months of 2015.

Shares fell 4.05 per cent to 476p as the company said the deal would be financed with an equity fundraising round that would be completed in early to mid June if Australian regulators approved the deal.

Nick Batram, analyst at Peel Hunt, said the deal made "compelling strategic sense" but warned it did not come cheap.

"We are cautious on the price paid in a sector where valuations are being driven ever higher by the key consolidators - which is fine until the music stops," he said.

The price tops the $589m paid by Delivery Hero earlier this week for a Turkish takeaway service, a deal that the Berlin-based company claimed was the biggest acquisition in the online food ordering sector.

Just Eat's acquisition of Menulog adds another geographic region to its portfolio. More than 70 per cent, or £114.1m, of its revenues are from the UK, with Denmark a distant second contributing £12.8m last year. On Tuesday, Just Eat reported a 51 per cent rise in online orders in the first quarter.

Menulog's management will remain in place, with chief executive Dan Katz commenting the acquisition would help the company benefit from Just Eat's know-how, "particularly in digital marketing".

The company charges an average rate of commission of 9.8 per cent, below Just Eat's UK rate of 12 per cent and average international rate of 11 per cent.

JPMorgan is advising Just Eat on the acquisition and the fundraising.

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