Cat Rock Capital Management, a U.S.-based investment firm, has told Just Eat plc (a U.K.-based food delivery service) to merge with another food delivery service. BusinessWire reported that Cat Rock explained in an open letter that Just Eat needs new management that would come from a merger.
Just Eat is an online food order and delivery service. It acts as an intermediary between independent take-out food outlets and customers. Headquartered in London, it operates in 13 countries in Europe, Asia, Oceania and the Americas. The company was founded in Denmark in 2001. Its 2017 revenue was £546.3 million (approximately $702 million).
Cat Rock is confident in the growth potential of Just Eat, but believes that current management is incapable of leading the company. The letter said that Just Eat should initiate merger discussions with industry peers with the goal of completing the transaction in the next few months.
The letter said a merger with a well-run industry peer would bring five advantages for Just Eat.
“1) Just Eat could secure world-class management for the Company.
2) Just Eat could acquire proven delivery capabilities.
3) Just Eat shareholders could receive a premium for our shares.
4) Just Eat shareholders could participate substantially in any value-creation that occurs post-merger.
5) A merger could make Just Eat dramatically more formidable as it competes to secure its market position against Uber, Deliveroo, and others.”
Cat Rock, which holds a 1.9 percent stake in Just Eat, is concerned that Just Eat’s board has so far rejected its assistance. The board rejected two potential chief executive officers recommended by Cat Rock and ignored Cat Rock’s suggestion to consult with recommended industry leaders.
“The Board’s experiment of appointing an industry outsider like Mr. Plumb to the CEO role failed miserably and destroyed shareholder value,” said Alex Captain, founder and managing partner of Cat Rock. “Now Just Eat needs a world-class management team with online food delivery experience and proven delivery capabilities. A merger is an obvious path for securing these advantages for the Company.”
Former Just Eat chief executive officer Peter Plumb was inexperienced in the food delivery business and caused the departure of the company’s management team, including chief operating officer Adrian Blair, chief marketing officer Barnaby Dawe and chief people officer Lisa Hiller.
Cat Rock was most concerned about the departure of Chris Simair, chief executive officer and co-founder of SkipTheDishes, because he led Just Eat’s global delivery initiative. Just Eat acquired SkipTheDishes in 2016.