Shares in Just Eat (JE.) have fallen to a 12-month low on speculation that Uber is in talks to buy food delivery service Deliveroo, thereby creating a stronger competitor. The news, reported by Bloomberg, also triggered share price weakness in sector peer Delivery Hero.

If true, a combination of Uber and Deliveroo would create a much stronger competitor to Just Eat. It has also happened at a time when Just Eat is looking weak while it plays catch-up with building a delivery network.

If Just Eat shares remain under pressure it stands to potentially lose its place in the FTSE 100 index at the next reshuffle in December. At the moment it is currently number 105 in the FTSE 350 index - FTSE 100 stocks automatically get kicked out of the top index if they slip below position 110 at the point of the quarterly reshuffle.

‘They say strength in numbers can be a powerful force and so it is no surprise that Just Eat’s shares have taken a big hit on speculation that Uber is going to buy Deliveroo,’ says Russ Mould, investment director at AJ Bell.

‘The combination of two competitors is the last thing Just Eat wants to hear,’ he adds. ‘Just Eat hasn’t been able to rest on its laurels for some time. Competition has been intensifying and there has also been a backlash from some of its restaurant clients against high fees. Many restaurant owners have abandoned the platform to focus on developing their own marketing and technology, or seek alternatives.’

Uber buying Deliveroo would make perfect sense. The two companies have been making good progress in taking market share for food delivery and combining forces would be enough to send shivers down the spine of Just Eat.

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Issue Date: 21 Sep 2018