Under CEO Bob van Dijk, Prosus showed unusual discipline when it decided to walk away from its R100bn bid for European food delivery giant JustEat. In this episode, Alec Hogg and I discuss why Prosus walked away and what the market made of the abandoned bid. We also delve into van Dijk’s thinking on food delivery – the hot sector has been criticised by those who see food delivery as fundamentally unprofitable, but perhaps Prosus is thinking differently. We also consider the opportunities on offer for those South African investors who are willing to venture overseas, and why more people should join them. – Felicity Duncan
Food delivery is a hot sector, with billions of dollars in venture capital flooding in as rivals fight to dominate markets around the world. However, while some believe the sky’s the limit when it comes to food delivery, others are more circumspect. Competition has made the business unprofitable and there is little evidence that margins will ever be huge for a low-value service. Many food delivery companies recognise this and are transforming themselves into “restaurants” – opening dark kitchens that prepare food exclusively for delivery with no marketing or fanfare. Others are getting into the advertising business, using the data they gather from their customers to target people with good ads. Despite these efforts, however, few companies have shown they can perform where it counts: the bottom line.
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In this context, it’s unsurprising that the market applauded when Prosus walked away from a R100bn bid for European food delivery group JustEat. The price had risen to staggering levels in a bidding war and few believed Prosus could make the deal pay. When the company wisely chose to abandon its unsolicited bid, investors heaved a sigh of relief.
Of course, Prosus continues to be active in the food delivery space and, as Alec Hogg explains, may be well-positioned to crack a good model given its global operations and experience with similar companies in other markets, like China. This underscores the benefits of being a global business, able to learn from the world’s best. As Hogg points out, this is one among many good reasons for South African investors to venture offshore.
