A Prosus flag is displayed ahead of the trading debut of the new Prosus unit of Naspers, outside the Amsterdam Stock Exchange on September 11. Picture: BLOOMBERG/JASPER JUINEN.
A Prosus flag is displayed ahead of the trading debut of the new Prosus unit of Naspers, outside the Amsterdam Stock Exchange on September 11. Picture: BLOOMBERG/JASPER JUINEN.

Prosus’s R93bn bid for British food delivery business Just Eat is everything you’d expect of an early 21st century hi-tech deal — audacious, eye-wateringly expensive and controversial. The sort of deal that keeps executives awake at night and shareholders in a state of high tension.

Investors more comfortable with the low-tech world might be inclined to point out how much you could buy with that sort of money — all of Shoprite as well as a good chunk of Pick n Pay or about 1.5% of Tencent. By contrast, they might say, Just Eat offers little more than a hi-tech logistics platform and a lot of bikes.

Prosus CEO Bob van Dijk would beg to differ. The acquisition of Just Eat offers an, unlikely to be repeated, opportunity to establish a near-unassailable position in the global online food delivery business. “In terms of opportunity, the food space is very, very, very large,” Van Dijk told journalists recently, adding with typical hi-tech hyperbole, “It’s probably the largest opportunity I’ve run into in my lifetime.”

If Van Dijk is right then he had little option but to make a cash offer generous enough to put an end to a merger proposal from Takeaway.com. If successful that all-share merger would result in Just Eat shareholders owning 52.2% of the combined Just Eat-Takeaway group and put an end to Prosus’s bid. The Just Eat board has rejected Prosus’s offer and is urging shareholders to accept the Takeaway proposal.

This rejection has in no way discouraged Prosus; as Van Dijk sees it the stakes are too high. A merger with Just Eat would create the largest food delivery business in the world putting it ahead of players such as Uber Eats, Amazon and Deliveroo. Just one of the enticements is domination of the European food delivery sector now worth $5bn but expected, by some, to be worth tens of billions in the long run.

The good news for Prosus’s shareholders is that Just Eat, which works with about 100,000 restaurants globally of which nearly 30,000 are in the UK, offers the considerable advantage of being a profit generator; for the six months to end-June it reported pretax profit of £800,000 on revenue of £464.5m.

The pretax profit figure would have been higher were it not for heavy investment in developing its own delivery network. Prosus has zoned in on the necessity of this sort of spending and says previous underinvestment in own delivery facilities, technology and marketing is why competitors have been able to steal market share from Just Eat. Resource-rich Prosus offers precisely what Just Eat needs to realise its vast potential, says Prosus.

But not everyone is as bullish as Van Dijk about the substantial network effects in food delivery that creates a winner-take-all scenario. Certainly they exist in Prosus’s other two activities, online payments and online classified advertising, but the evidence for it in web-based food delivery is not as compelling.

Grubhub was thought to have secured an unassailable position in the US with control of over 30% of the food delivery market. Its recent results, which prompted a 43% on-day drop in the share price, see it being assailed on a variety of fronts. Unrelenting competition, increasing scrutiny from regulators, growing tensions with restaurant owners over commissions charged and evidence of the near impossibility of securing customer loyalty, all combined to knock earnings below expectations.

Van Dijk, who is tasked with closing Prosus’s multibillion-dollar discount to its Tencent investment, lives in a world dominated by stories of big winners and big losers. Despite some initial hesitation by the Naspers board back in 2001, Tencent proved to be one of the biggest winners. Prosus’s bid for Just Eat is being made not only as WeWork reminds us about the losers but also at a time when Tencent’s glow seems to be fading ever so slightly.

The stakes are indeed high for Van Dijk and the Prosus’s shareholders.

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