FT : Takeaway.com proposes £5bn deal to gobble up Just Eat

Takeaway.com proposes £5bn deal to gobble up Just Eat
Deal would create one of the largest online food delivery groups in the world

Takeaway.com and Just Eat have reached an “agreement in principle” for a takeover deal that would value the latter at £5bn, creating one of the largest online food delivery companies in the world.

The proposed all-share deal would see Amsterdam based Takeaway.com acquire its London-based rival at 731p a share, a 15 per cent premium to Friday’s closing price of 636p.

The announcement comes after it emerged over the weekend that the two companies were in talks over a possible merger.

The combination would create a food delivery group which had a combined 360m orders worth €7.3bn in 2018, with a strong presence across the UK and Europe. The two companies do not currently have any major geographical overlap: Just Eat is focused on the UK and western Europe, and is expanding into Canada, Latin America and Australia, while Takeaway.com holds a dominant position in Germany and eastern Europe.

Under the arrangement, Just Eat shareholders would own around 52.2 per cent of the new company, while Takeaway.com shareholders would own 47.8 per cent. The proposed deal gives Just Eat shareholders 0.09744 Takeaway.com shares for each share they currently own.

Jitse Groen, chief executive of Takeaway.com would lead the group, with Just Eat chief financial officer Paul Harrison retaining his role at the new company.

The merged group — Just Eat Takeaway.com NV — would be incorporated, headquartered and domiciled in Amsterdam, while retaining a London listing. A “significant part of its operations” would remain in the UK.

Just Eat and Takeaway.com said on Monday that talks were “ongoing” and “at an advanced stage”. Under UK takeover rules, the Dutch group has until August 24 to announce its “firm intention” to make an offer or pull out.

>>> Europe : Brokers Upgrades & Downgrades - 29th of July 2019 (V2)

>>> Up
* AB InBev Upgraded to Buy at BofAML
* Centrica Upgraded to Hold at HSBC; Price Target 90 Pence
* Financiere France BQE Raised to Hold at Kepler Cheuvreux
* Just Eat Upgraded to Neutral at JPMorgan; PT 8 Pounds
* Pearson Upgraded to Buy at Citi
* Qinetiq Upgraded to Buy at Berenberg
* REN Upgraded to Outperform at Mediobanca SpA; PT 2.80 Euros
* Telefonica Deutschland Raised to Outperform at MainFirst

>>> Down
* AIB Group Downgraded to Underperform at BofAML
* Clariant Downgraded to Neutral at Goldman; PT 19.50 Francs
* Daimler Downgraded to Reduce at AlphaValue
* Galapagos Downgraded to Hold at Jefferies; PT 180 Euros
* Galapagos ADRs Downgraded to Hold at Jefferies; PT $201
* Informa Downgraded to Hold at Peel Hunt
* Informa Downgraded to Neutral at Citi
* J. Martins Downgraded to Hold at Deutsche Bank
* Klepierre Downgraded to Sell at AlphaValue
* Piaggio Cut to Hold at Kepler Cheuvreux; Price Target 2.80 Euros
* Renault Downgraded to Reduce at AlphaValue
* Sanne Group Downgraded to Outperform at RBC; PT 6.60 Pounds
* Syzygy Downgraded to Hold at M.M. Warburg
* Wartsila Downgraded to Add at AlphaValue
* Wereldhave Downgraded to Sell at AlphaValue

>>> Initiation
* Balfour Beatty Rated New Hold at Jefferies; PT 2.45 Pounds

>>> Call
* Ericsson Joins Goldman’s Conviction List on ‘Solid’ Fundamentals
* Informa Gets Downgrades at Citi and Peel Hunt on Valuation
* Pearson Has Attractive Valuation Says Citi, Upgrades to Buy

>>> Europe : Brokers Upgrades & Downgrades - 29th of July 2019

>>> Up
* Centrica Upgraded to Hold at HSBC; Price Target 90 Pence
* Financiere France BQE Raised to Hold at Kepler Cheuvreux
* Just Eat Upgraded to Neutral at JPMorgan; PT 8 Pounds
* Pearson Upgraded to Buy at Citi
* Qinetiq Upgraded to Buy at Berenberg
* REN Upgraded to Outperform at Mediobanca SpA; PT 2.80 Euros
* Telefonica Deutschland Raised to Outperform at MainFirst

>>> Down
* Daimler Downgraded to Reduce at AlphaValue
* Galapagos Downgraded to Hold at Jefferies; PT 180 Euros
* Galapagos ADRs Downgraded to Hold at Jefferies; PT $201
* Informa Downgraded to Hold at Peel Hunt
* Informa Downgraded to Neutral at Citi
* Klepierre Downgraded to Sell at AlphaValue
* Piaggio Cut to Hold at Kepler Cheuvreux; Price Target 2.80 Euros
* Renault Downgraded to Reduce at AlphaValue
* Wartsila Downgraded to Add at AlphaValue
* Wereldhave Downgraded to Sell at AlphaValue

>>> Initiation
* Balfour Beatty Rated New Hold at Jefferies; PT 2.45 Pounds

>>> Call
* Informa Gets Downgrades at Citi and Peel Hunt on Valuation
* Pearson Has Attractive Valuation Says Citi, Upgrades to Buy

FT : The Time Is Right for a Universal Music Deal French media conglomerate Vive

The Time Is Right for a Universal Music Deal
French media conglomerate Vivendi would be wise to sell a stake in the world’s largest music company while growth is so strong

The first half of 2019 may end up marking the peak of the party in the music industry. French media conglomerate Vivendi needs to sell a stake in Universal Music Group, the world’s top music company, while everyone is still having such fun.

Santa Monica-based UMG grew revenue by 18.6% in the first half compared with the same period of 2018, excluding currency gains, Vivendi reported after the market close in Paris on Thursday. Streaming revenue grew by 25.5%, but the real surprise was that physical music sales—a segment long in decline—were up by 15%. On a call with analysts Vivendi called out the soundtrack to the Lady Gaga and Bradley Cooper movie “A Star Is Born” as well as album sales by Queen and releases by the Japanese band King & Prince. Vivendi shares rose 6% Friday.

But this isn’t the start of a new golden age for the CD. Physical album sales can be lumpy, depending on releases. The fashion for vinyl records is real, but the market is still small. Vivendi said it still sees declining physical sales as the “normal trend.”

Meanwhile, streaming is slowing. Last year UMG’s revenue from platforms like Spotify and Apple Music rose by a thumping 37.3%. In the U.S., the number of songs streamed increased by 72.5 billion in the first half, according to a midyear report by data provider Nielsen, compared with an increase of 76.6 billion a year earlier.

Vivendi—which also owns a mixed bag of other companies including a French cable network and ad agencies—said a year ago that it would sell as much as 50% of UMG, but is taking its time. It gave little detail of discussions with potential partners alongside its half-year results, but said that it expects to announce a deal within six months. It has talked with Tencent, China’s music-streaming leader, according to Bloomberg.

One problem seems to be Vivendi’s aggressive price expectations—sell-side valuation estimates for UMG start at roughly $20 billion—even though the owner doesn’t want to give up control. Vivendi expects a minimum valuation of $25 billion-$30 billion, according to Bloomberg. The first-half results could help reassure bidders.

Another barrier to a deal could be continuing contract negotiations with streaming giant Spotify, whose growth has led the industry’s revival. But the status quo, whereby virtually all the industry’s profits are taken by rights owners like UMG and its artists rather than innovative distributors like Spotify, doesn’t seem likely to change any time soon—however unfair.

This is because UMG always has the nuclear option of withdrawing its catalog from Spotify, which puts the platform in a weak negotiating position. The reminder that streaming revenue is slowing and CDs aren’t yet dead won’t have strengthened Spotify’s hand, either. Even Spotify bulls such as Benjamin Swinburne, an analyst at Morgan Stanley, don’t expect this year’s negotiations to change the company’s cut of industry revenues.

First-half results have reinforced UMG’s reputation as the most attractive asset in a booming industry. The rest of the year may not be so easy. Vivendi should press its advantage.