07.01.2020

Takeaway.com has been on a mission for the past few years to assert its dominance as one of the world’s leading online food delivery service providers. In only six months the company has made two major acquisitions; acquiring Delivery Hero, Grubhub and merging with UK based Just Eat plc. All this while fending off counteroffers from competitors such as Prosus NV and out bidding rivals.

The Merger:

The merger between Takeaway.com and Just Eat took nearly six months to complete. The company had to fend off multiple bids, including a GBP 5.5 billion bid from competitor Prosus, the investment unit of South African internet conglomerate Naspers Limited.

The merger between the two companies was announced back in July 2019. Takeaway.com’s initial offer valued Just Eat at 731 pence per share (representing a 15 percent premium) and resulted in Just Eat shareholders owning 52.2 percent and Takeaway.com shareholders owning 47.8 percent of the share capital of the combined group.

The merger also brought significant changes in the combined group corporate governance structure, including, adopting a 2-tier board structure that comprises of an Executive Board and Supervisory Board. The 2-tier structure is a common practice laid out by the Dutch Corporate Governance code.

Additionally, change was announced to both the Supervisory and Executive board with the intention to increase the presence of both companies involved in the newly formed entity. The Supervisory Board increased from four to seven members with four members coming from Just Eat and the three from Takeaway.com.

On the Executive Board, the Co-Founder and CEO of Takeaway.com, Mr Jitse Groen, retained his position as CEO, Just Eat CFO took over as the Group CFO and the positions of COO would be shared as a Co-COO between the other two members.

The intended rearrangement was said to foster “a strong founder-led management team with years of combined experience in the sector”. [1]

CGLytics presented a scenario analysis of the board composition on the date of the announcement and what the board is comprised of before and after the merger.

Takeaway.com’s Board Expertise and Skill Matrix (pre-merger)

Takeaway.com board skills and expertise
Source: CGLytics Data and Analytics

Just Eat Takeaway Board Expertise and Skill Matrix (post-merger)

Takeaway.com and Just Eat board skills and expertise
Source: CGLytics Data and Analytics

In the post-merger analysis, there is improvement to the overall board structure. Governance expertise are increased as well as Financial expertise, which are core competencies and imperative to a board. In a market with tough competition, that includes big names such as Uber Eats, Deliveroo, plus others gradually increasing their presence, not having the right expertise and skills on the board pose corporate governance risks.

The analysis also reveals that the company is lacking in Technology expertise. For a company that carries out most of its business online, it should be an expertise area worth considering to improve.

As much as the merger seemed a good fit for both companies involved, South African owned Prosus had other intentions. The company twice increased its hostile bid for Just Eat including a GBP 5.5 billion bid in cash (740 pence per share), which the company deemed “a more compelling and certain value for Just Eat shareholders at a further premium to Takeaway.com’s offer”[2].

Nonetheless, Takeaway.com was offering Just Eat shareholders more control whereas Prosus’ offer was looking to decrease their control. Just Eat shareholders ultimately rebuffed Prosus’ offer citing the bid as “significantly undervaluing” the group [3].

At the beginning of 2020, rumours started circulating that a deal had been met; Takeaway.com and Just Eat settled on an implied value of 916 pence per share. Subsequently, on February 3, 2020, Just Eat announced it had suspended its listing and trading on the London Stock Exchange. The combined company was renamed to Just Eat Takeaway. The new partnership has brought changes to the company’s compensation strategy.

The Acquisitions:

Within the past year Takeaway.com has made multiple acquisitions.

In 2019 the company won the battle with Delivery Hero in the German market, agreeing to buy the larger rival’s activities in Germany in a deal worth EUR 930 million.

In 2020, after nearly a month of negotiations, US based Grubhub stepped away from a potential acquisition from Uber Eats after concerns of antitrust and instead merged with the newly formed Just Eat Takeaway. The company agreed to acquire Grubhub for USD 7.3 billion in stock. The deal will see the company be able to take on rivals such as Uber Eats and DoorDash, which are also based in the US market.

Just Eat Takeaway shareholders will control around 70 per cent of the combined company, while the rest will be owned by Grubhub’s investors. After the deal, Just Eat Takeway’s CEO was quoted as stating:

“Would it be better to just wait one year after every transaction? Yes, sure. We’d get more sleep. But that’s just not how the world turns” [4]

Impact on CEO Compensation:

During the company’s 2020 Annual General Meeting (AGM), shareholders agreed to significantly increase the bonuses of the CEO and Executive Board. Where it was absent prior, there will be a Short-Term Bonus (STI) of a maximum of 150 percent of the base salary and an on target of 75 percent of basic salary.

In addition, there has been an adjustment to the Long-Term Incentive (LTI). The LTI has increased from a maximum of 150 percent to a maximum of 200 percent of the base salary and will be paid in the form of performance shares rather than performance stock options. The pay is, of course, dependent upon the achievement of performance objectives such as revenue growth relative TSR and a strategic target. [5]

The below table provides an example of what the potential earnings for the CEO might look like if all performance objectives are met versus what was earnt over the past two years.

CEO earnings
Source: CGLytics Data and Analytics

The company argued that the adjustment is to align the remuneration policy with the current size, scope and complexity of the company following the merger with Just Eat. Shareholders seem to agree to the proposal, which earned a resounding 99.2 percent approval at the 2020 AGM.

Takeaway.com is on a mission to become the worlds largest online food delivery service provider and based on the company’s most recent actions, one would say it is well on its way. However, it is not going to be easy road, out-bidding rivals and fending off large competitors in order to do so.

Interested to see how your company stacks up against 5,900 globally listed companies’ governance practices including their CEO Pay for Performance, board composition, diversity, expertise and skills?

 

Click here to contact CGLytics and learn about the governance tools available and currently used by institutional investors, activist investors and leading proxy advisor Glass Lewis in their proxy papers.

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