Grubhub Sued for Securities Violations Relating to Proposed $7.3B Acquisition

A shareholder has filed suit against Grubhub Financial Inc. and the members of its board of directors for violations of the Securities Exchange Act of 1934 in connection with the proposed acquisition of Grubhub by affiliates of Just Eat N.V. The Southern District of New York complaint claims that the proxy statement Grubhub filed with the Securities and Exchange Commission (SEC) on April 27 is materially incomplete and misleading.

Wednesday’s filing explains that Grubhub and its subsidiaries offer an online and mobile platform for restaurant food pick-up and delivery orders in the United States. Just Eat reportedly offers similar services in several European countries.

According to the companies’ June 10, 2020 press release reprinted in the complaint, Just Eat agreed to acquire Grubhub in an all-stock transaction “to create the world’s largest online food delivery company outside of China, measured by Gross Merchandise Value … and revenue.” Under the terms of the proposal, Grubhub shareholders’ stock will be converted into the right to receive American depository receipts representing approximately 0.67 of Just Eat ordinary shares.

The complaint takes issue with the proxy statement’s purported omissions and material misrepresentations concerning Grubhub and Just Eat’s financial projections. Specifically, the shareholder argues that it fails to provide line items in the calculation of certain accounting metrics and projected net income information for both companies, though that information is relied upon in valuation estimates. In addition, the statement allegedly fails to disclose multiple inputs underlying the financial advisor’s discounted cash flow and premia paid analyses.

The plaintiff claims that without the necessary information, Grubhub’s stockholders cannot make an informed decision concerning whether to vote in favor of the deal. The complaint seeks to enjoin the defendants from moving forward with the acquisition until the alleged errors in the proxy are corrected.

In the event that the deal is consummated, the plaintiff seeks damages resulting from the alleged Securities Exchange Act violations. The shareholder is represented by Melwani & Chan LLP.

In 2020, Uber Technology Inc. considered purchasing Grubhub, but the deal, met with skepticism by lawmakers, fell through. Instead, Uber purchased rival food delivery service Postmates last July.