Menulog acquisition by Just Eat for USD $687 million

Date: 09-05-2015

Techcrunch has reported that UK Listed company Just Eat plans to acquire Menulog / Eatnow for an eye popping £445, which is US$687 and a AUD $865 million.  The purchase, which will be funded by an equity issue, has been described by Jonathon Buxton from Cavendish Corporate Finance as  having a “hefty price tag.”  The Menulog acquisition comes only a few months after Menulog acquired Eat Now and the combined company now has 5,500 restaurants across Australia and new Zealand.

Update:  7 Reasons Just Eat may have bitten off more than it can chew.

How will Just Eat justify the $865 million acquisition of Menulog?
How will Just Eat justify the $865 million acquisition of Menulog?

Just Eat dropped 59.4p in London trading to 436.7p.  The acquisition will require approval of the Foreign Investment Review Board.

The Techcrunch article reports that Menulog had revenue of $26 million AUD in revenue and profit of just $2,340,000 in profit.  This does not represent the revenue from Eat Now, nor does it reflect the inevitable cost savings that will come once the layoffs at Eat Now have been factored in.

$865 million represents a price per restaurant of $157,272 per Restaurant.   it also shows that each restaurant was bringing in just $4727 in Revenue and just $425 in profit each.  Just Eat will need to drastically increase both the amount of profit per restaurant and the number of restaurants.

The purchase of Menulog on the figures to March 31 represents a Price / Earnings multiple of 369, which is very high number considering the small size of the Australian and New Zealand markets.  Techcrunch suggests that penetration is just 22% in Australia, but we believe that it will be very difficult to find the next 5,500 restaurants.

Implications of the Menulog Acquisition for Australian Restaurants.

This will make things very interesting with both only small Australian companies left to fight against the UK Just Eat Group and Europe based Delivery Hero.  It is important that there remains some competition otherwise Restaurants will see commissions paid to the restaurants rise.  It remains to be seen what the impact will be on the revenue and profitability of Menulog and Delivery Hero, and Zomato once they commence online ordering.  It will make it hard to increase Commissions charge by Menulog and there aren’t enough Restaurants in Australia.

Meanwhile, our own Free Restaurant OnLine Ordering System which is still in Beta now has a waiting list of over 100 Restaurants who want to take orders from their own website without paying commission and without sharing their customer’s contact details.

The Beta program is in its’ final stages with only a couple of final features to be added.  We expect to release FROLO in 6 – 8 weeks time.  This will dramatically decrease the costs that Restaurants are paying in Commission to companies like Menulog and Delivery Hero.

Restaurant owners can find out about how to take orders online without paying any commission, by joining our Free Restaurant OnLine Ordering

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