Amazon to receive warrants for stake in Grubhub

Amazon has entered an agreement that could give it a more than 15% equity stake in U.S. restaurant delivery service Grubhub.

With the deal, announced Wednesday, U.S. Amazon Prime members also can sign up for a free Grubhub trial subscription that will provide a year of access to unlimited, $0 delivery fees on Grubhub from restaurants nationwide.

Under the commercial agreement, Grubhub parent Just Eat Takeaway.com said an Amazon subsidiary will receive warrants (exercisable at a de minimis price) for more than 2% of Grubhub’s fully diluted common equity. Amazon also will receive warrants (exercisable at a formula-based price) for up to another 13% of Grubhub’s fully diluted common equity. The vesting of the additional warrants rests on certain performance conditions, namely the number of new consumers delivered through the commercial pact, Amsterdam, Netherlands-based Just Eat Takeaway said. Unless terminated by Amazon or Grubhub, the agreement renews automatically each year.

Valued at $9.99 per month, the free Grubhub trial subscription for Amazon Prime members can be used for a year at hundreds of thousands of restaurants in more than 4,000 cities.

“I am incredibly excited to announce this collaboration with Amazon that will help Grubhub continue to deliver on our long-standing mission to connect more diners with local restaurants,” Adam DeWitt, CEO of Chicago-based Grubhub, said in a statement. “Amazon has redefined convenience with Prime, and we’re confident this offering will expose many new diners to the value of Grubhub while driving more business to our restaurant partners and drivers.”

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Amazon noted that, starting today, members of its Prime customer benefits program can use the free Grubhub perk, valued at $9.99 per month, at hundreds of thousands of restaurants in more than 4,000 cities. To activate the Grubhub benefit, Prime members enroll at amazon.com/grubhub. The unlimited, $0 food delivery fee applies to restaurant orders over $12. Grubhub members also get exclusive perks and rewards such as free food and order discounts.

“Being able to give Prime members one year of Grubhub and no delivery fees from restaurants is our way of saying thank you,” commented Jamil Ghani, vice president of Amazon Prime. “The value of a Prime membership continues to grow with this offer, and this year is shaping up to be a great time to enjoy the convenience, savings, fun — and deliciousness — that membership provides.”

Citing research from the National Restaurant Association, Grubhub reported that 53% of U.S. adults and 64% of Millennials consider the purchase of takeout and delivery food as “essential” to the way they live, but just 38% of Americans say they sometimes use third-party delivery companies like Grubhub. Grubhub added that its partnership with Amazon will help expand Grubhub membership and bring more value to Amazon Prime, which includes free two-hour grocery delivery on orders of $35, digital entertainment benefits and other perks.

Related:SpartanNash stock warrant offers company stake to Amazon

“Both Grubhub and Amazon have transformed people’s lives by providing them with unprecedented choice and convenience,” stated Ariella Kurshan, senior vice president of growth at Grubhub. “With the new Grubhub and Amazon offering, Prime members now can enjoy free delivery from hundreds of thousands of restaurants across the country when they sign up for a year of free Grubhub . I’m thrilled that new Grubhub diners from Amazon can get even more delivered to their door with their Prime membership.”

For Amazon, the deal with Grubhub marks another food company agreeing to grant warrants for an equity interest. In October 2020, SpartanNash issued a stock warrant to an Amazon investment affiliate that would enable the Seattle-based e-tail giant to become one of the grocery distributor’s largest institutional shareholders. At the time, the aggregate number of shares offered through the warrant represented about 15% of SpartanNash’s outstanding shares.

And for Gruhub, the Amazon partnership comes just months after Just Eat Takeaway (JET) said it was exploring “the introduction of a strategic partner into and/or the partial or full sale of Grubhub.” JET CEO Jitse Groen made the statement during a trading update in April, Supermarket News sister publication Nation’s Restaurant News reported. One of the world’s biggest online food delivery marketplaces, JET agreed to acquire Grubhub in a $7.3 billion deal in 2020, which at the time created the largest food delivery company outside China, connecting restaurants with delivery partners in 25 countries.