Foodpanda Global – a subsidiary of Germany’s Rocket Internet – has acquired its main competitor and Pakistan’s largest online food portal, EatOye, in a series of acquisitions to become the market leader in the region, the company announced on Friday.
“With the recent acquisitions, Foodpanda becomes the market leader across Southeast Asia,” said Co-Founder and Global Managing Director of Foodpanda Ralf Wenzel in a statement.
After acquiring what was their only competitor thus far, Foodpanda has become the market leader in Pakistan, holding a whopping 90% share in the country’s online food-ordering market, which industry sources value at Rs15 billion or $150 million a year.
With this acquisition, Foodpanda completes its first buyout in Pakistan’s emerging market, the statement said, and that the company would also add more than 3,000 restaurants for both platforms.
EatOye, which was backed by Arpatech (an IT company), was acknowledged as one of the fastest growing companies in the Asia-Pacific region in 2014, bagging APAC ICT Alliance Awards in the hospitality industry last year.
The Karachi-based food portal recorded a whopping 682% growth in its orders and a Gross Merchandise Value (GMV) of over Rs150 million in 2014, according to sources. GMV is one of the key measures of an e-commerce site’s performance.
At present, EatOye has in excess of 1,000 restaurants across 15 different cities in Pakistan and offers table reservations as well as online food ordering. It attracted a quarter of a million visitors each month and completed over 30,000 transactions (delivery orders or reservations) in 2014.
Both Foodpanda and EatOye refused to disclose any financial details, market analysts, however, put the transaction value at a maximum $3 million depending on negotiations and the company’s 2014 revenues.
If the company charges 20% commission, their 2014 revenues would be approximately Rs30 million, an official said requesting anonymity.
With a price-to-sales multiple between 2 and 10, the company’s net worth should range between $300,000 and $3 million depending on negotiations. However, if the company was highly profitable, they might have negotiated a price-to-sale multiple higher than 10, said the official.
Though a small transaction in terms of value, it is a positive sign for the country’s startup market, say experts. This transaction reflects foreign investors’ increasing confidence in the country, market sources say.
Rocket Internet usually invests in its own subsidiaries but they have bought a Pakistani startup for the first time that means the money is flowing into the country.
The transaction comes as part of a series of acquisitions by Foodpanda Global, which is active in 39 countries across five continents.
“Weeks after a series of acquisitions in Europe, the Foodpanda group also gained a leading position in Southeast Asia, next to its other core markets in India, Russia, Brazil and Mexico,” said the press release.
Besides EatOye, it has also acquired JUST EAT and TastyKhana in India; Room Service in Malaysia and Singapore, City Delivery in the Philippines, Koziness in Hong Kong and Food By Phone in Thailand.
“The plan is to bring the overall market share to Foodpanda. This is part of our strategy for South Asia whereby we acquire competitors to become the market leader,” Foodpanda Pakistan Managing Director Ahsan Mateen told The Express Tribune, explaining the company’s interest in the market.
“Together, we are now exposed to a larger target audience, which will enable us to work together and touch base with the untapped market segments,” said Mateen.
The two entities will continue to work separately with separate accounts and separate managements, EatOye’s CEO Nauman Sikandar Mirza said. “There will be strategic collaboration.”
Market analysts, however, believe that the two businesses will merge into one entity going forward and separate operations are only a temporary strategy.
EatOye is certainly a bigger player with a loyal customer base and an established brand name while Foodpanda has had some issues in quality of service, said an official.
Published in The Express Tribune, February 7th, 2015.