The takeout shakeout continues apace. Since going public in 2014, Rocket Internet has been trying to simplify and reorganize the tangle of e-commerce startups funded and grown by the Berlin-based incubator to make the main business more profitable. Today comes the latest move on that front. Rocket Internet is selling food takeaway operations in Spain, Italy, Brazil and Mexico to Just Eat for €125 million ($140 million) — with the admission that they are all “non-core operations that are not market-leading”, in the words of Rocket.
The operations in Brazil and Mexico accounted for less than 5% of foodpanda’s revenues in 2015, Rocket noted.
Just Eat, based in London, competes with the likes of Delivery Hero and others in online food ordering and delivery services. It went public in 2014 at a $2.4 billion valuation and has been steadily growing, currently valued at $3.7 billion. Rocket Internet is valued at $4 billion. Its losses have been widening and the stock has been trading at the low end of its range. It got a 10% bump on today’s news.
It’s not completely clear how much Rocket Internet invested in the operations it is selling in Spain (La Nevera Roja), Italy (PizzaBo & hellofood Italy), Brazil (hellofood Brazil) and Mexico (hellofood Mexico). Rocket Internet does not always disclose all of these details, and it’s often hard for outsiders to gauge money poured into individual operations versus the bigger global brands.
But e-commerce is a game of thin margins and massive scale, and there are clues that Rocket is selling these at a loss.
For example, in Italy, hellofood is understood to have paid €55 million — nearly half the value of the whole deal today — for PizzaBo alone.
And in Spain, Rocket Internet acquired La Nevera Roja only in February 2015, for a price understood to be €80 million, according to Jaime Novoa, who also picked up on the Spanish portion of this sale/acquisition weeks before Rocket Internet and Jus actually confirmed it.
Just Eat notes that the value of the gross assets of the businesses acquired as at 31 December 2014 was €6.4 million ($7.1 million). The aggregate losses before tax were €16.3 million ($18.2 million).
Just Eat seems to think that it will be able to build a profit where Rocket Internet could not. The businesses grew orders by 83% in 2015, Just Eat says, and it projects the new businesses will add £5 million ($7.3 million) to Just Eat’s 2017 EBITDA, and £10 million in 2018.
To be sure, Rocket Internet still has an appetite for the food ordering and delivery business: the company has pooled other assets from the portfolio, as well as investment, into a partnership with onetime rival DeliveryHero.
“The online takeaway market remains a core focus of Rocket Internet’s business strategy with the significant ownership in the market leaders Delivery Hero and foodpanda,” Oliver Samwer, CEO of Rocket Internet, said in a statement. “Today’s transactions are clearly aimed at reducing the complexity of Rocket Internet’s network of companies.”
It claims that its remaining takeout business, foodpanda, is “the market leader in growth markets with a presence in 24 countries.”
What’s becoming more clear, however, is that the larger food delivery businesses, after years of wild-sized investments, consolidation and ruthless price-busting competition for market share, are now in a more sober period of refocus that’s resulting in some reshuffling among the bigger players to build up in specific regions.
“The divestment in Latin America allows us to focus on our key markets across Asia, the Middle East and Eastern Europe where foodpanda has a market leading position and to which we can now dedicate more resources and capital to grow our business and improve the efficiency of our operations. We are on a very good path to reach our global growth target,” said Ralf Wenzel, Co-founder and CEO of foodpanda, a sentiment echoed by Just Eat.
“The acquisitions from Rocket Internet and foodpanda represent a positive step forward for the global online takeaway industry enabling all parties to focus their resources on building bigger and better long term businesses in their key geographies,” said David Buttress, CEO, Just Eat, in a statement.
Rocket said that its limited property value, including cash, remains at the latest disclosed figure of €7.2billion as of 30 November 2015.
Rocket said the transactions in Italy, Brazil and Mexico will be completed today. “The transaction in Spain will be completed by the end of Q2 2016, as it is still subject to regulatory approval from the Spanish competition authority, the Comisión Nacional de los Mercados y la Competencia,” it added.