Acquisition hungry Takeaway.com cooks up a debt and equity storm

Brent Wissink

Amsterdam-based Takeaway.com is continental Europe’s leading online food delivery business, which also operates in Israel. The company, launched in 2000, is riding a wave of enthusiasm for online marketplaces, on which customers can choose from nearly 44,000 menus. Its website processed nearly 100 million orders in 2018 alone.

In an increasingly crowded marketplace, Takeaway.com made four strategic acquisitions in 2018, aiming to expand its footprint and consolidate in its major markets. Primary among these was its agreement in December to acquire the German operations of rival Delivery Hero for approximately €930m. The transaction is expected to be completed on April 1.

“Germany was one of our biggest markets but we were one of two players competing head to head,” says Takeaway.com chief financial officer Brent Wissink. “That meant we were required to spend significant sums on marketing, which was not the most efficient way to run the business. At the same time, we were talking to Delivery Hero, because we knew it made sense for the market to consolidate, and we eventually found a way to acquire its operations late last year.”

Takeaway.com agreed to pay €930m in cash and shares to buy Delivery Hero, consisting of €508m in cash and 9.5 million shares worth about €422m and representing about 18% of the company’s outstanding share capital before refinancing.

Refinancing focus

Takeaway.com secured an equity underwriting commitment from ABN Amro, Bank of America Merrill Lynch and ING, and a bridge financing commitment provided by ABN Amro and ING. To offset those, the company planned a two-pronged capital markets transaction comprising an accelerated book build and a concurrent offering of convertible bonds.

“Immediately after we had announced the acquisition we started thinking about the refinancing, which we knew was essential as we don’t currently make the earnings before interest, tax, depreciation and amortisation to cover a long-term loan,” says Mr Wissink. “The deal was signed on December 21 and right after Christmas we started working on this transaction.”

The company need to refinance about €680m and had authorisation to issue 20% of its outstanding share capital. Given that would be insufficient to cover the whole €700m, it made sense to pay off the remainder with a convertible bond.

“There were also other advantages to this approach,” says Mr Wissink. “The combination of equity and convertible represented a good way to keep our leverage down and was also a route into a more diverse investor base.”

The company appointed ABN Amro, Bank of America Merrill Lynch and ING as joint global coordinators and joint bookrunners on the capital increase. Bank of America Merrill Lynch, Société Générale and UBS Investment Bank acted as joint global coordinators and joint bookrunners on the offering of the convertible bonds, alongside ABN Amro and ING as joint bookrunners.

A comfortable launch

Takeaway.com is in touch with its investor base through regular contact so did not plan a dedicated roadshow. However, it held calls with investors that required more information and then announced both deals on January 17. The company planned initially to increase its capital to 6.5 million ordinary shares and to issue €250m of convertibles.

"All of the investors had a good understanding of the story, so we felt comfortable when we launched,” says Mr Wissink. “We soon were more than four times covered on the share issues and [had] more than €1bn of orders for the bond.”

The conversion premium range on the bonds was set at 32.5% to 37.5% and the bond was launched to be priced in a coupon range of 2% to 2.5%. In the end both came in the middle of those ranges. The bond was issued at 100% of nominal value with an interest rate of 2.25%. The conversion price was set at €69.525, representing a premium of 35% above the issue price per new shares in the capital increase. On the equity side, high demand enabled the company to upsize the capital increase to 8.35 million ordinary shares, meaning it eventually raised about €430m at an issue price of €51.50 per share.

“We had more than 100 orders for both the equity and the bonds, and a good mix of hedge funds and long-only investors,” says Mr Wissink. “There was a nice balance between US, UK and other European investors, with probably most in the UK.”

The company has no plans to return to the capital markets in the near future, but that may change.

“We are good for now,” says Mr Wissink. “But given this was the first time we tapped the market to fund a big acquisition, and that it went so well, we definitely see it as a viable source of funding for the future.”