Amazon teams up with Just Eat on US food delivery with Grubhub investment

AMAZON has agreed to take a 2 per cent stake in Just Eat Takeaway.com's struggling US meal delivery business Grubhub and will offer its Prime members access to the service for 1 year.

The deal is a major relief for Just Eat Takeaway, whose shares have fallen 70 per cent this year as shareholders demanded it sell or find a partner for Grubhub, which it bought just last year for US$5.8 billion in shares.

In a note on the deal, Credit Suisse said the partnership should strengthen Grubhub.

There is "no crystallisation of value, albeit (the) door is open for more," the bank said.

Shares in Just Eat were up 14 per cent at 15.70 euros at 0710 GMT in Amsterdam trading.

Under the deal announced as part of Amazon's July "Prime Day" promotion on Wednesday (Jul 6), Amazon customers will receive free delivery on orders over US$12 in the 4,000 cities where Grubhub operates.

The deal will drive traffic for Grubhub, which has lost share to Doordash and Uber Eats as the impact of the Covid-19 pandemic wanes.

In exchange, Amazon will receive warrants representing 2 per cent of Grubhub's shares, and an additional 13 per cent of shares conditional on the deal bringing Grubhub enough customers. "The agreement is expected to expand membership to Grubhub+, while having a neutral impact on Grubhub's 2022 earnings and cash flow, and be earnings and cash flow accretive for Grubhub from 2023 onwards," Just Eat Takeaway said in a statement.

The company said that Grubhub's gross assets were worth 6.5 billion euros (S$9.3 billion) at the end of 2021, and it made a pretax loss of 403 million euros in that year. REUTERS