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James Li
James Li
Articles (631)  | Author's Website |

Grubhub Skyrockets on New Partnership With Yum Brands

KFC parent invests $200 million in major food takeout service

February 08, 2018 | About:

Grubhub Inc.’s (NYSE:GRUB) share price increased over 20% on Feb. 8 on the heels of a new partnership with Yum Brands Inc. (NYSE:YUM).

The Chicago-based food takeout company announced it agreed to issue and sell 2,820,464 shares of common stock to the Louisville, Kentucky-based fast-food chain for a purchase price of $70.9103 per share, or $200 million in the aggregate.

Partnership aligns with Yum Brands’ long-term goals

Yum CEO Greg Creed said the company is committed to facilitating the online ordering process for its customers over the long term. The announced partnership with Grubhub allows KFC and Taco Bell to market their signature products on the Grubhub platform, including KFC’s “Original Recipe” chicken and Taco Bell’s innovative menu items like Doritos Locos Tacos. Ultimately, the partnership expects to improve order management efficiency, including order placement, delivery and pick up. Creed adds that the strategic investment in Grubhub demonstrates the company’s “laser-like focus” on two key drivers: distinctive brands and unmatched franchise operating capability.

Grubhub taps into online and pick up space

Grubhub CEO Matt Maloney mentioned the company’s “best-in-class logistics platform” makes the company “the ideal partner for Yum Brands,” allowing Grubhub to tap into the innovative advertising of KFC and Taco Bell. Maloney mentioned that although the company primarily engages in the delivery of food, the partnership with Yum gives Grubhub a “massive opportunity” to break into the online order and pick up space.

Maloney also mentioned that Grubhub will add Pizza Hut U.S. President Artie Starrs as the tenth member of its board of directors as part of the announced partnership. The two companies expect to collaborate on the best way to leverage their respective scale and expertise.

Partnership sends Grubhub’s share price flying

Grubhub traded approximately $20 higher from its previous close of $69.91.

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The two companies reported solid revenue and earnings growth during the three months ended Dec. 31, 2017. Grubhub’s revenues increased 49% while Yum Brand’s as-reported earnings per share increased 53% compared to comparable figures from fourth-quarter 2016.

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Disclosure: No positions.

About the author:

James Li
I am an editorial assistant and researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

Visit James Li's Website


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