Shares in Grubhub Inc. (GRUB) rose more than 5% following a report that Delivery Hero and Just Eat Takeaway.com are lining up to buy the food delivery company, as takeover talks with rival Uber Technologies Inc. (UBER) are ongoing.
According to a CNBC report, Netherlands-based Just Eat Takeaway.com and German company Delivery Hero are interested in merging with Grubhub.
Shares closed 5.2% higher at $60.53 on Friday and advanced another 2.4% in after-hours trading.
The news comes after antitrust concerns have shed some doubt on the chances for a deal for Grubhub with Uber. The two companies have reportedly been discussing a breakup fee should the takeover fail because of antitrust concerns.
Grubhub is looking for the right deal structure with potential buyers given market conditions and regulatory risks, according to the CNBC report. The company is evaluating a number of offers, some of which are all-stock and some that are both cash and stock.
Grubhub generates most of its revenue from the U.S., serving more than 1,600 U.S. cities, but it also has some operations in London. A deal with a European-based company would likely carry far lower regulatory risk than merging with Uber, which would combine two of the four largest U.S. food delivery services.
Uber has been focusing on ramping up its food delivery business as the demand for the service has been offsetting weak rides demand during the coronavirus pandemic. Both Uber and Grubhub have been benefiting from an increase in food delivery demand during stay-at-home orders.
Five-star analyst John Staszak at Argus last month maintained a Hold rating on Grubhub’s stock, saying that the company grapples with higher cost and margin pressure as it looks to enter new markets.
Staszak expects the company to experience slower growth as it struggles to differentiate itself from a growing number of competitors.
A review of analysts’ ratings shows that the stock has 14 Holds versus 4 Buys and 1 Sell adding up to a Hold consensus. The $51.64 average analyst price target now indicates 15% downside potential in the shares over the coming year after their value almost doubled since March. (See Grubhub stock analysis on TipRanks)
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