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Amazon (AMZN) Takes Equity Stake in Grubhub

Stake of 2% can reach 15%; Amazon Prime members can get year of free deliveries

Amazon.com, Inc. (AMZN) has taken a 2% equity stake in food delivery service Grubhub, a subsidiary of Amsterdam-based Just Eat Takeaway.com N.V. (LSE: JET, AMS: TKWY). A subsidiary of Amazon will receive warrants (exercisable at a de minimis price) for 2% of Grubhub’s fully diluted common equity. Amazon will also receive warrants (exercisable at a formula-based price) for up to an additional 13% of Grubhub’s fully diluted common equity.

As part of the deal, Amazon Prime members in the United States can sign up for a free, one-year Grubhub+ membership and get unlimited $0 delivery fees from Grubhub for that year. In addition to $0 delivery on eligible orders, Grubhub+ members get access to member-only perks and rewards.

Key Takeaways

  • Amazon.com (AMZN) has taken a 2% stake in food delivery service Grubhub.
  • It can increase its stake to 15%, depending on its meeting goals for driving more traffic to Grubhub.
  • Amazon Prime members can get unlimited free Grubhub deliveries for a year, as a promotional offer.
  • Grubhub's parent, Amsterdam-based Just Eat Takeaway.com, is looking to sell all or part of Grubhub, which posted a large loss in 2021.

Key Terms of the Deal

The commercial agreement between Amazon and Grubhub automatically renews each year unless terminated by either company. Amazon needs to meet certain conditions to increase its stake in Grubhub beyond the initial 2%. The main one is being able to bring new consumers to the service. Meanwhile, Just Eat Takeaway.com will continue to actively explore the partial or full sale of Grubhub, possibly to parties other than Amazon.

Recent Earnings and Stock Performance

In its Q1 FY 2022 earnings report, Amazon posted a loss of $7.56 per share, compared to a consensus estimate that called for a profit of $8.55 per share. Total revenues, however, met analysts' expectations. Shares of Amazon traded at around $113 on the morning of July 6, 2022, largely unchanged from the pervious day's close and down by nearly 40% from their 52 week high of $188.65.

For the 12 months ending Dec. 31, 2021, Gubhub posted a pretax loss of 403 million euros, or about $411 million at the July 2, 2022 exchange rate of $1.02 per euro. Shares of Just Eat Takeaway (JET.L) trading on the London Stock Exchange were up by over 15% on the news of the deal, but remain down by about 81% from their 52 week high.

Article Sources
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  1. Grubhub. "Just Eat Takeaway.com and Amazon enter into commercial agreement in the US."

  2. Grubhub. "Grubhub and Amazon Delight U.S. Prime Members with Free Grubhub+ for Unlimited $0 Food Delivery from Restaurants."

  3. Yahoo Finance. "Amazon.com, Inc. (AMZN)."

  4. Yahoo Finance. "Just Eat Takeaway.com N.V. (JET)."

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