James Packer Approves sale of MenuLog for a colossal AUD 855 million

James Packer of Crown Casino gave the go-ahead for the selling of MenuLog for AUD 855 million.

James Packer, third richest Australian, subject of many gambling news, currently the chairperson of Crown Limited (one of Australia’s most extensive entertainment resort groups), has backed the plan to sell MenuLog for AUD 855 million to a British rival firm, Just Eat. As an investor in Catch Group, the Lebovich brothers’ online market organization, James Packer will also receive a sizable amount after his shares in the company. The Catch Group owns 25% of MenuLog, which means that once the sale is given the green light, the Catch group will receive around AUD 215 million.

MenuLog was expected to be sold for AUD 500 million

Although most predicted MenuLog to be sold for around AUD 500 million in the Goldman-Sachs run sale, its final price exceeded all expectations. The company’s 2014 annual revenue of AUD 40 million mislead people into thinking that it was not worth more. MenuLog, the service facilitating food order and delivery for approximately 5,500 restaurants in Australia, was wanted by many of its rivals, like German-owned Delivery Hero (39% of its shares is owned by Rocket Internet AG) and the British Just Eat group.

• MenuLog to be sold for AUD 855 million to Just Eat
• James Packer backs sale of MenuLog
• Big acquisitions in the online food order and delivery sector

What most people failed to take into consideration is that there has been an ongoing surge of acquisitions of online food delivery platforms recently. For instance, the procurement of Turkish group Yemeksepeti by Delivery Hero for another large sum: AUD 743 million. Yemeksepeti is a fast-growing business processing more than 3 million orders each month. With this purchase, Delivery Hero has grown to more than 10 million orders each month. Another benefit of Rocket Internet AG’s new addition is that it will boost the German company’s presence is the Middle East significantly.

The extensive publicity of online food delivery sites are causing valuations to skyrocket.

Mobile betting platforms report that as well as Delivery Hero, other companies, such as the American GrubHub and the British Just Eat are also aiming to buy out as many smaller online food ordering platforms as they possibly can. As a result of this, the value of most companies has risen by a large portion. David Buttress’ comment to site The Financial Review suggests that MenuLog was a great purchase because it is “growing like a train.” The number of orders backs this comment; in the March quarter, they were up by 96%, while Just Eat’s quarterly information suggests an increase around 51%, not taking into account the percentages in minus that represent the acquisition of MenuLog.

With valuations going through the roof, there is only one problem: business deals become based on humongous multiples and once they go through and the hype dies down, companies are left with acquirements that are worth much less than what they were sold and bought for. Best examples for this phenomenon are the sites Groupon (estimated at $17.8 billion in 2012, now worth around $4.5 billion), the site Spreets acquired by Yahoo!7 for AUD 40 million and BrandExclusive sold to APN News and Media for AUD 42 million, both of which are now priced at just fragments of their original rate.

The merger was a previously planned move from Just Eat.

More than 1.4 million users across New Zealand and Australia is a great strategic opportunity to expand to other markets, and this is what the British group Just Eat saw when MenuLog was thrown on the market. David Buttress, CEO of Just Eat said, “The acquisition of Menulog, a business with strong leadership in an attractive and fast-growing market, is fully consistent with this approach and will be an important addition to the Just Eat business.” He also expressed his eagerness to be working together with the CEO of MenuLog and his “experienced management team” in the near future.

According to online gambling news in Australia, Just Eat plans to keep the management team of MenuLog within the company, especially since Just Eat will most definitely be benefitting from it. Dan Katz, CEO of MenuLog mentioned that, Just Eat will gain access to the vast knowledge and experience of the Australian food delivery site, especially in the areas of customer service and digital marketing. Thus, we can safely say that Just Eat is not only buying an average online food delivery service from Australia, but a leader in its region – something that will seemingly prove to be extremely favourable.