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Just Eat Surges as Acquisitions Underscore Expansion Potential

  • Shares rise as much as 11% in biggest gain since September
  • Company buying four businesses from Rocket Internet for $138m

Just Eat Plc shares jumped after a bundle of international acquisitions underlined the ambitions of Britain’s largest online takeaway marketplace to expand beyond a crowded domestic market.

The 94.7 million-pound ($138 million) purchase from Rocket Internet SE of online food distributors in Spain, Italy, Brazil and Mexico adds to Just Eat’s existing operations in those countries. The company entered Mexico last year as it seeks to broaden its presence beyond the U.K., where it still gets almost three-quarters of sales.

The shares rose as much as 11 percent to 400 pence, the biggest intraday gain in about five months. Since starting in Denmark in 2001, Just Eat has expanded to 15 international markets, with Spain and Italy among the fastest growing. Competition in the U.K. is heating up, prompting some analysts to downgrade Just Eat. Rocket Internet partly owns rival company Delivery Hero, which it plans to list on the stock exchange this year.

“We see the deals as positive, with Just Eat taking control of its own destiny,” Nick Batram, an analyst at Peel Hunt, said in a note.

Just Eat has average organic sales growth of 46 percent across the countries it operates in, sending the company’s valuation soaring to 41 times estimated earnings over the next 12 months, according to Bloomberg data. GrubHub Inc., a U.S. rival, trades on 29 times estimated earnings.

After gaining 60 percent last year, the stock has fallen 22 percent in the early part of 2016 amid concern over whether Just Eat can sustain its rapid growth at home. Companies such as Deliveroo, which physically deliver food from restaurants to a customer’s front door, are becoming an increasingly popular alternative to Just Eat’s online-only portal.

Chief Executive Officer David Buttress dismissed the competition as a niche segment in which profitable growth is hard to achieve and reiterated Just Eat’s ambition to keep taking share of the online market. Ten years ago, 90 percent of U.K. takeaway orders were placed over the phone compared with less than 70 percent now, he said.

“We want to take consumers from the offline world into the online world,” he said. “The loser is the telephone.”

The company is scheduled to report full-year results March 1.

In aggregate, the four businesses Just Eat is acquiring boosted orders by 83 percent in 2015, the company said. Just Eat expects the deals to increase earnings before interest, tax, depreciation and amortization by 5 million pounds in 2017 and by 10 million pounds in 2018.

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