GrubHub shares rise after Yum Brands picks up stake

February 8, 2018 7:19 AM EST

By Sonam Rai

(Reuters) - GrubHub Inc shares surged 36 percent on Thursday after Yum Brands Inc bought a 3 percent stake in the online food delivery company, giving it funds and an established partner to compete with Amazon and Uber.

The stake, worth $200 million, values GrubHub at about $6.7 billion, roughly 10 percent higher than the company's market capitalization on Wednesday. At the stock's high on Thursday, GrubHub was valued at about $8.2 billion.

"We signed a strategic exclusive partnership with the largest restaurant chain in the world. I think that's very exciting, and part of it is the validation that it brings," Chief Executive Matt Maloney told Reuters.

GrubHub said it will become Yum Brands' only national U.S. partner, making pickup and deliveries for thousands of KFC and Taco Bell restaurants across the country.

The deal with Yum Brands comes as GrubHub and other food delivery companies face rising competition from similar services offered by bigger and more established companies such as, Uber and Facebook Inc.

"We believe the YUM partnership could quickly add close to 10,000 Taco Bell and KFC restaurants to the GRUB portfolio while creating opportunities for GRUB to leverage Pizza Hut's massive delivery infrastructure," Craig-Hallum analyst Alex Fuhrman said.

The company also added hamburger chain White Castle, The Cheesecake Factory and InterContinental Hotels to its network in the fourth quarter, increasing its restaurant network to 80,000, which helped its profit beat market estimates.

The Chicago-based company said it had 14.5 million active diners – the number of unique accounts from which an order has been placed in the past twelve months – in the quarter.

That was well above analysts estimate of 11.5 million diners, according to data and analytics firm FactSet.

GrubHub's net income soared to $53.5 million from $13.6 million due a $34.1 million benefit related to U.S. tax reforms. Excluding items, it earned 37 cents per share.

Revenue rose 49.2 percent to $205.1 million.

Analysts on average were expecting a profit of 31 cents per share on revenue of $201.7 million, according to Thomson Reuters I/B/E/S.

The company forecast first-quarter revenue of $224 million to $232 million, the mid-point of which was slightly above analysts' estimates of $227.5 million.

GrubHub's shares hit a record high of $94.87, before easing slightly to trade up about 32 percent at $92.01 in afternoon trading. The stock's previous all-time high was $77.96.

(Reporting by Sonam Rai in Bengaluru; Editing by Shounak Dasgupta and Savio D'Souza)

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