Grubhub revealed that it has been struck by 14 different shareholder lawsuits that allege unlawful actions were taken when the third-party giant announced its intentions to merge with Just Eat Takeaway last year.
The lawsuits name Grubhub and its board members as defendants. The complaints include: filing false/misleading information, breaching fiduciary duties because of an allegedly flawed and inadequate sales process and potential conflicts of interest, inadequate compensation for Grubhub shares, and claims that Grubhub officers have significant financial interests in completing the transaction because of potential payouts and positions in the combined company.
"The process deployed by the Individual Defendants was flawed and inadequate, was conducted out of the self-interest of the Individual Defendants, and was designed with only one concern in mind – to effectuate a sale of the Company by any means possible no matter the price," one lawsuit argues. "Notably, the Company failed to conduct a sufficient market check for potentially interested third parties. In fact, the Preliminary Proxy Statement indicates that the Board only considered two other potentially interested counterparties and does not indicate if any other outreach to find more potentially interested third parties was conducted at all."
The court filings seek various remedies, namely preventing the consummation of the merger, unless the issues are resolved. In response to each lawsuit, Grubhub argues that it fully complied with all applicable law and that no supplemental disclosures are required. The company also states that each shareholder allegation is without merit.
With that said, Grubhub decided to make certain disclosures anyway in a recent SEC filing to put to rest any claims that were or could have been asserted and to avoid nuisance and possible expense and transaction delays. The company is doing this without admitting any liability or wrong doing.
“Nothing in this Current Report on Form 8-K shall be deemed an admission of the legal necessity or materiality under applicable law of any of the disclosures set forth herein,” the SEC filing states. “To the contrary, Grubhub and the other named defendants have denied, and continue to deny, that they have committed or assisted others in committing any violations of law, further deny all allegations that any disclosure was or is required or material, and expressly maintain that, to the extent applicable, they have complied with their respective legal obligations.”
Grubhub said it would merge with Just Eat Takeaway for $7.3 billion in June 2020. As part of the transaction, the combined entity would become the world’s largest online food delivery company outside China, with service in more than 25 countries. Under the terms, Grubhub shareholders would receive American depositary receipts (ADRs) representing 0.6710 Just Eat shares in exchange for each Grubhub share, which have an implied value of $75.15 per share. Grubhub shareholders are expected to own 30 percent of the new company.
In the first quarter, Grubhub saw 33 million active diners, or a 38 percent increase year-over-year. Gross food sales rose 60 percent to $2.6 billion and daily orders increased 44 percent to 745,700. However, the company reported a net loss of $75.5 million, compared to a net loss of $33.4 million last year, and a negative adjusted EBITDA of $9.3 million.