Amazon Strikes Partnership Deal with Grubhub That Could Include Small Equity Stake
E-commerce giant adds restaurant delivery to its Prime membership; Grubhub parent Just Eat Takeaway.com continues to explore possible sale of the U.S. food-ordering company
Amazon.com Inc. AMZN 3.60%▲ agreed to add Grubhub to its suite of Prime services in the U.S., in a deal that also gives the e-commerce giant the option to acquire a small stake, the parent of the food-ordering company said.
Grubhub’s parent, Netherlands-based Just Eat Takeaway.com NV, TKWY -2.65%▼ said Amazon has an initial option to take a 2% stake in U.S.-based Grubhub, and U.S. Prime members can have their delivery fees waived from select restaurants. Amazon could bump up its total stake to 15% of Grubhub based on performance terms focused on adding new customers, Just Eat said.
Just Eat will still own Grubhub and will continue exploring a full or partial sale of Grubhub, it said. The deal will renew annually unless either Amazon or Just Eat terminates it and it is expected to materially add to Grubhub’s business next year, Just Eat said.
The deal brings Amazon further into food-related services through its Prime membership program. The online commerce giant has provided grocery benefits to Prime members under its Whole Foods Market division as a way to make its annual subscription program more valuable.
Amazon last year said that millions of Prime members in the U.K. and Ireland would get discounts through U.K. food delivery firm Deliveroo, in which Amazon invested in 2019.
Amazon will offer Prime members a subscription to Grubhub’s membership program for a year, which includes free delivery from a network of restaurants, as well as other discounts.
Grubhub CEO Adam DeWitt said the deal will introduce new customers to the company’s membership program and bring more business to restaurants and drivers that work with Grubhub.
Just Eat said it expects the agreement to expand membership to Grubhub’s subscription program and have a neutral impact on the division’s earnings and cash flow this year, while adding to earnings next year.
Netherlands-based Just Eat said in April that it would consider a full sale of Grubhub after acquiring Grubhub in a $7.3 billion deal that closed last year. Activist investor Cat Rock Capital Management LP, Just Eat’s third-largest shareholder according to FactSet, has pressed the company to focus on its European markets, and sell Grubhub.