Cut DH to EW, reiterate OW on Talabat

Research evidence excerpt

Cut DH to EW, reiterate OW on Talabat

Barclays | Delivery Hero / Talabat

very high offer to change course. On the downside, we note there is a break fee in the

transaction of €700m were (for example) the transaction to not occur due to antitrust concerns.

So we can't dismiss this risk entirely, but we think the proposal put forward to separate some

countries into a separate vehicle owned by SSW is a clear indication in the direction of the

overall antitrust conversation, and we imagine all relevant stakeholders have had a lot of legal

counsel on this approach. All in, we think the transaction is unlikely to fall apart.

Reiterating Talabat at OW. We increase our PT to AED 1.60, equivalent to the IPO price, vs AED

1.40 prior due to slightly higher outer years / lower discount rate. Our positive view on Talabat

reflects a few factors.

1. Competition still live but some light at end of tunnel. Competitive pressures are still fluid

and a point of uncertainty with competition seemingly most intense in Kuwait and Qatar.

We could be seeing some glimmers of light in UAE where the impact of KeeTa seems

somewhat less, and new regulations on predatory pricing this week could have an impact

(in time). But most importantly, the trends in KSA from broader DH suggest Hungerstation is

emerging strongly on the other side of the KeeTa entrance with growth strong and

profitability rebounding. We think ultimately other GCC countries should follow a similar

course.

2. Uber adds value. Talabat should become a better business if Uber becomes the parent

company on top of Delivery Hero, in our view. There would also be an opportunity to deeply

integrate the leading ride and delivery platforms in the GCC region and broaden the value

prop of the subscription offer.