Spending spree - e-commerce in demand as PE adds THG to basket

Data InsightDealspeak 31 May

Spending spree - e-commerce in demand as PE adds THG to basket

Fresh interest in THG (The Hut Group) [LON: THG] is showing that a spending spree for e-commerce is far from finished as investors continue to shop around for the next bargain in the sector.

The beauty, nutrition and lifestyle e-commerce conglomerate has received rival unsolicited offers, but founder and CEO Matt Moulding is refusing to offer a discount and would reportedly back an offer of GBP 3bn (EUR 3.52bn) for the business.

If successful, a deal could provide a much-needed boost to European M&A data for the sector, Dealogic data shows. The first half of this year has seen deal volume of EUR 3.48bn across 71 transactions, which was overshadowed by EUR 18.9bn across 160 deals in the same period the year before.

Zalando, which was taken private with a valuation of EUR 5.4bn, and pet food marketplace Zooplus, which was acquired by Hellman & Friedman and EQT for EUR 3.4bn, both contributed to a bumper 2021.

Food delivery stale?

While interest in THG proves hopeful for sector activity, investor appetite for food-delivery platforms, which helped last year’s activity reach EUR 51.4bn value across 334 deals, could be at risk of going stale.

JustEat Takeaway’s (JETW) [LON: JET] attempt to sell its recently acquired US food-delivery business Grubhub could show that deals are now harder to digest. JETW bought the business last year for USD 7bn, but it could be sold for a fraction of that price and maybe even as low as GBP 1bn.

Meanwhile, Deliveroo [LON: ROO] has been subject to takeover speculation following a subdued London listing. However, Delivery Hero already ruling out an approach for the company.

This stands in stark contrast to bumper valuations in the sub-sector last year. Wolt Enterprises was acquired by DoorDash for EUR 7bn and Glovoapp by Delivery Hero for EUR 774m. Valuations also boomed among startups holding mega-rounds last year, including Gorillas and Getir.

Bargain hunting

Sponsors who are still hungry for e-commerce assets may turn their attention to other sub-sectors, as depressed valuations in public markers bring the prospects of bargain shopping. Those in the limelight include classified marketplace operator Scout24 [ETR:G24], which was reported earlier this year to have attracted interest from Hellman & Friedman, EQT and Permira.

Meanwhile, Adevinta, which acquired ebay classified for USD 9.2bn in 2020, could also be a consolidator. Dutch internet and technology investor Prosus is also tipped to be an active participant in the space. Elsewhere Auto1 [ETR:AG1], the German used-car dealer marketplace, could be subject to sponsor interest as dealmakers look to steer towards another deal following Cazoo’s EUR 5.5bn SPAC listing last year.

Food-delivery riders dealing with a sudden loss of energy (known to cyclists as "the bonk") will perhaps be unsurprised to see aggression from investors interested in cars.

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