Financial muscle is both a weapon and a liability in mergers & acquisitions. Prosus’s €4.1bn bid for Just Eat Takeaway is a textbook example of the “deep-pocket effect”, in which shareholder expectations inflate as soon as they smell the acquirer’s wealth.
Prosus, flush with a nearly $20bn war chest, has framed the €20.3 per share offer as a generous premium — 49% above Just Eat’s three-month volume-weighted average price. Yet BDL Capital Management, a small shareholder in Just Eat, argues the bid undercuts the fair valuation by 64%.
Sure, BDL’s valuation is rooted in an extensive and methodical approach, weaving in sector benchmarks and intrinsic value, and it is not unreasonable to imagine that as long-term shareholder Prosus’s offer is a bitter pill to swallow for the stock that fetched nearly $110 per share in 2020.
Still, Just Eat is losing money — €1.6bn in 2024. That is a company in trouble, and the stock market plunge from the 2020s highs is Exhibit A. And the issue transcends arithmetic. When deep pockets in the evaluation, shareholder resistance, and governance questions emerge, will shareholders join BDL in opposing the deal? Will Prosus overpay to make good on its promises to create a European tech powerhouse?
Prosus’s offer may ultimately succeed, but not without a bruising that tests both its determination and commitment to prudent capital allocation.
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