A potential tie-up between food delivery service Just Eat (JE.) and Amazon is being rumoured after the regulator for M&A ordered a halt in Amazon’s stake in rival Deliveroo.
A report in the Evening Standard has suggested that Amazon may look to take a minority stake in Just Eat, or even buy the business altogether, after the Competition and Markets Authority (CMA) put the brakes on its deal with Deliveroo.
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Amazon was the lead investor in a recent $575m funding round for Deliveroo, but the CMA fears the UK branch of Amazon’s EU business could be planning to merge with Deliveroo, and has ordered it to pause taking a stake in the service.
AMAZON 'DESPERATE' TO GET INTO UK MARKET
The enforcement order has reportedly led Amazon to look at Just Eat, with City brokers describing the US giant as ‘desperate’ to gain a foothold in the UK delivery market.
Analysts at Liberum reckon it makes sense for Amazon to invest in or acquire Just Eat describing the reports as 'entirely credible'.
This is on the basis that it’s the market leader in the food delivery market not just in the UK, but in virtually all of the 13 countries in which it operates, with the possible exception of Australia.
A deal is likely to be welcomed by shareholders, given the company's shares have dropped 26% in the past year to hover around the 630p mark, amid ongoing pressure from rivals Deliveroo and Uber Eats.
The analysts said, ‘If Amazon is interested in the space - which seems obvious given its investment in Deliveroo - it makes sense to invest in the market leader.’
REGULATOR COULD ALLOW JUST EAT DEAL
The analysts believe Amazon would be allowed by the regulator to invest in Just Eat, as what seems to have irked the CMA with the Deliveroo deal is that Amazon appeared to be trying to push through an implicit merger without going through a formal M&A process.
As long as Amazon was up front about its intentions and promised to keep Just Eat distinct, Liberum thinks the regulator would look more favourably upon any potential deal.